💥Join UPSC 2027,2028 Mentorship (June Batch) + XFactor Notes & Microthemes PDF

Consider the following statements

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 ?

(a)

1 and 2 only

(b)

2 and 3 only

(c)

1 and 3 only

(d)

1, 2 and 3

Explanation

Statement 3 is wrong: domestic currency will increase the risk with external commercial borrowings. It will not decrease the risk therefore by elimination the answer is “A”.