Which of the following is a feature of the Indian capital account?
A. Partial convertibility with controls on certain capital flows
B. Only current account convertibility without any capital flows
C. Complete ban on capital inflows
D. Complete convertibility for all capital transactions
Answer: Option A
Solution (By JKSSB Mock Tests)
India has achieved current account convertibility but maintains a managed and partial capital account convertibility with prudential controls on certain flows.
Explanation:
Herd behaviour occurs when agents follow the actions of others rather than their own private information, which can generate informational cascades, bubbles and crashes.
Explanation:
Both covered and uncovered interest parity conditions relate the interest differential between two countries to the forward premium or the expected change in the exchange rate.
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