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 ?
Options
(a)1 and 2 only
(b)2 and 3 only
(c)1 and 3 only
(d)1, 2 and 3
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Class 12Open Economy Macroeconomics— NCERT Economics, Chapter 6. An open economy trades goods and services and financial assets with the rest of the world; imports are a leakage from, and exports an injection into, the circular flow.…
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