Question 34
AOptions
BSolution
Convertibility of a currency, such as the Indian Rupee, refers to the ease with which it can be exchanged for other foreign currencies, and vice versa, without significant governmental restrictions or controls. When a currency is convertible, individuals and businesses can exchange it for foreign currencies for various purposes, including trade, investment, and travel. This implies that the value of the currency is largely determined by market forces (demand and supply) rather than administrative controls. India's Rupee is currently fully convertible on the current account and partially convertible on the capital account.
CStrategy
Understand fundamental economic terms and concepts. For currency concepts like convertibility, focus on the core meaning related to the freedom of exchange and the role of market forces versus government control. Distinguish between different levels of convertibility (current account, capital account).
DSyllabus Analysis
This question falls under the Indian Economy, specifically relating to the external sector, foreign exchange, and exchange rate management.
EQuestion Analysis
Easy. This is a basic and straightforward concept in international economics and finance.