When India’s Capital Account Surplus exceeds Current

Account Deficit, then:

A Forex reserve will increase Correct Answer Incorrect Answer

B Forex reserve will decrease Correct Answer Incorrect Answer

C No effect of forex reserve Correct Answer Incorrect Answer

D May increase or decrease Correct Answer Incorrect Answer

E None of the above Correct Answer Incorrect Answer

Solution

When the Capital Account has surplus that exceeds the deficit of Current Account, then there is a net surplus in Balance of Payment. In other words, there is net inflow of foreign currencies. This will increase the forex reserve of RBI.

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