Question

What is the purpose of capital controls?

1. To support fixed exchange rates and enable currency speculations
2. To support fixed exchange rates and prevent speculative attacks on currencies
3. To support floating exchange rates and prevent speculative attacks on currencies
4. To support the managed float and enable currency speculations

Answer 1

2. To support fixed exchange rates and prevent speculative attacks on currencies

Step-by-step explanation:

Capital control is any restriction placed on the exchange of currencies across a countries borders. It is done to prevent volatility of exchange rate. it reduces speculative attacks on currency. It also controls the flow of currency in an economy.

Capital control can be in the form of a fixed exchange rate or placing an upper limit on the amount of currency that can be imported or exported.