The terraform init command retrieves and caches the configuration for all remote modules referenced in the Terraform configuration files. It downloads the source code for these modules and stores them locally (typically in the .terraform directory) so they can be reused without additional downloads in subsequent runs unless the -upgrade flag is used to force updates
The question is not so clear.
In case, by "all modules" they mean all modules that are mentioned in the code, then the answer is yes but if they mean all the modules that exist, the answer is no.
I think, the answer here should be B. False.
Because, as you mentioned, from context we understand that the question means all modules, not just ones in the code.
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