Consider the following statements about Capital Account Convertibility CAC 1 CA...........

Economic Affairs Balance of Payments

Consider the following statements about Capital Account Convertibility (CAC)

1. CAC refers to freedom in respect of Payments and transfers for current international transactions.

2. CAC allows anyone to freely move from local currency into foreign currency and back while purchase and sale of assets.

3. Premature capital account liberalization can create macroeconomic imbalances with huge costs to growth and welfare

Which of the statements given above is/are correct?

1 and 2

Only 3

2 and 3

1 and 3

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Explanation:

1st statement is incorrect.
Capital account convertibility is a feature of a nation's financial regime that centers on the ability to conduct transactions of local financial assets into foreign financial assets freely or at country determined exchange rates. It is sometimes referred to as capital asset liberation or CAC.