The problem of international liquidity is related to the non-availability of

Answer: (c) dollars and other hard currencies

International liquidity means the supply of reserve assets that countries can use to settle payments with other countries. Under the Bretton Woods system these were mainly gold and convertible currencies such as the US dollar. A shortage of international liquidity is therefore a shortage of dollars and other hard (freely convertible) currencies.

• ✓ (c) Countries pay foreign obligations from reserves made of gold, dollars and other convertible currencies. When these are too scarce to finance world trade and payments, the result is an international liquidity problem. The SDR was created in 1969 to add to this supply.
• ✗ (b) Gold was one reserve asset, but silver is not a reserve asset. The problem is about the overall shortage of usable reserve assets, led by the dollar, and not about the two metals.
• ✗ (a) Goods and services are what reserves are used to buy. Scarcity of goods is a supply or trade issue, not an international liquidity issue.
• ✗ (d) Exportable surplus affects a country's ability to earn foreign exchange. Liquidity is about the stock of acceptable international means of payment.

Remember · International liquidity means the stock of reserve assets (gold, dollars, other convertible currencies, SDRs). A shortage of dollars and other hard currencies is the classic liquidity problem.

Question: UPSC Civil Services (Preliminary) 2015, General Studies paper. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). · Report an error