Arrange the following statements related to foreign exchange market (fixed exchange rate) in correct sequence.

(A) RBI intervenes to purchase the dollars for rupees in the foreign exchange market in order to absorb this excess supply.
(B) The government will fix a higher exchange rate by making the rupee cheaper for foreigners.
(C) Supply of dollars exceeds the demand for dollars.
(D) The Indian government wants to encourage exports.

Choose the correct answer from the options given below:

(D), (B), (C), (A)

The correct answer is Option (1) → (D), (B), (C), (A)

• (D) The Indian government wants to encourage exports. (This is the ultimate goal or motivation).

• (B) The government will fix a higher exchange rate by making the rupee cheaper for foreigners. (To encourage exports, the government deliberately devalues the domestic currency, which is called an official devaluation in a fixed exchange rate system. A "higher exchange rate" here means more rupees per dollar, e.g., from $\text{Rs. }70/\$$ to $\text{Rs. }80/\$$).

• (C) Supply of dollars exceeds the demand for dollars. (A cheaper rupee makes Indian goods cheaper for foreigners, increasing exports and thus increasing the supply of dollars in the domestic foreign exchange market. At the fixed, but deliberately high, rate, the market faces an excess supply of dollars).

• (A) RBI intervenes to purchase the dollars for rupees in the foreign exchange market in order to absorb this excess supply. (In a fixed exchange rate system, the central bank (RBI) must intervene to maintain the fixed rate. To eliminate the excess supply of dollars, the RBI buys the excess dollars, increasing its foreign exchange reserves).