Consider the- following statements : 1. Tight monetary policy of US Federal Reserve could lead to capital flight. 2, Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs). 3 Devaluation of domestic curr

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Q: 61 (IAS/2022)
Consider the- following statements :
1. Tight monetary policy of US Federal Reserve could lead to capital flight. 2, Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs). 3 Devaluation of domestic currency decreases the currency risk associated with ECBs.
Which of the statements given above are correct ?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,138,92,138,23,26,43

keywords: 

{'currency risk': [0, 0, 0, 1], 'tight monetary policy': [0, 0, 0, 2], 'us federal reserve': [0, 0, 0, 1], 'external commercial borrowings': [0, 0, 1, 1], 'domestic currency': [0, 0, 0, 1], 'capital flight': [0, 0, 0, 1], 'ecbs': [0, 0, 0, 1], 'devaluation': [0, 3, 0, 3], 'interest cost': [0, 0, 0, 1], 'firms': [0, 0, 0, 4]}

None is correct as per official Key

 

Preparing for Future Exams: Learning from the Analysis of Past Questions

Topics:

  • Monetary Policy
  • Capital Flight
  • External Commercial Borrowings (ECBs)
  • Interest Cost
  • Currency Risk

Sources:

  • Economic newspapers and magazines such as The Economic Times, Business Today, and Business Standard
  • NCERT textbooks on economics
  • Reference books on macroeconomics such as "Macroeconomics" by Mankiw and "Macroeconomics: Theory and Policy" by D.N. Dwivedi

NCERT and reference book chapters:

  • Class 12 NCERT textbook "Macroeconomics" Chapter 6: Open Economy Macroeconomics
  • Chapter 16 "International Capital Flows and Foreign Investment" in "Macroeconomics" by Mankiw
  • Chapter 17 "Exchange Rates and the Foreign Exchange Market: An Asset Approach" in "Macroeconomics: Theory and Policy" by D.N. Dwivedi

Related concepts:

  • Monetary Policy Tools (Open Market Operations, Reserve Requirements, Discount Rate)
  • Foreign Exchange Market
  • Exchange Rate Regimes
  • Capital Account Convertibility
  • Balance of Payments