Question:
Capital account convertibility signifies
Capital account convertibility signifies
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CAC $\Rightarrow$ freedom for \textbf{capital flows}; Current-account convertibility $\Rightarrow$ freedom for \textbf{trade payments}.
Updated On: Aug 12, 2025
- guaranteeing the right to investment to foreigners
- ensuring the right of buyers to make international payments
- ensuring free international movement of capital
- ensuring the right of an individual to invest in foreign capital markets
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The Correct Option is C
Solution and Explanation
Definition: Capital account convertibility (CAC) means residents and non-residents can freely convert local financial assets into foreign financial assets and vice versa at market-determined rates—i.e., unrestricted {capital} flows. It goes beyond current-account convertibility (trade in goods/services). Therefore (c) is the broad, correct characterization.
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