The concept of 'Sudden Stop' in international finance refers to:
A. A gradual reduction in capital flows
B. Only a stop in domestic investment
C. Only a stop in trade flows
D. An abrupt reversal of capital inflows into a country
Answer: Option D
Solution (By JKSSB Mock Tests)
A sudden stop is a large and abrupt reversal of capital inflows, often associated with currency crises, output collapses and balance-sheet problems in emerging markets.
Explanation:
Selective credit controls (such as margin requirements and credit ceilings for specific sectors) are qualitative measures aimed at directing credit flow rather than controlling its overall volume.
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