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      Question

      Which of the following best describes Capital Account

      Convertibility ?
      A Freedom to convert domestic currency into foreign currency for trade in goods and services only Correct Answer Incorrect Answer
      B Freedom to convert domestic currency into foreign currency for all types of transactions, including capital assets and investments Correct Answer Incorrect Answer
      C Restriction on the use of foreign exchange for current account transactions Correct Answer Incorrect Answer
      D Policy allowing only NRIs to invest in domestic markets without restrictions Correct Answer Incorrect Answer
      E A measure used to control inflation through monetary policy Correct Answer Incorrect Answer

      Solution

      Capital Account Convertibility refers to the freedom to convert local financial assets into foreign financial assets and vice versa at market-determined exchange rates without any restrictions. It allows free movement of capital across countries for investment, borrowing, and other financial transactions.

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