Q. Consider the following statements regarding the Capital Inflows:
- Current Account flows are permanent while Capital Account Flows are reversible
- Current Account flows arise out of transactions in services while Capital account inflows arise out of transactions in goods.
- The Government needs to keep a close eye on the Capital Account flows because they may get reversed.
Which among the above statements is/ are correct?
Answer:
Only 1 & 3
Notes: The second statement is not correct , capital account flows are essential in various kinds of loans and equity investments, which can be reversed.