ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capital account helps to manage the surplus or deficit created in the current account. Investments, loans and borrowings, and foreign exchange reserves are the three major elements of a capital account. This account tracks the inflow and outflow of goods and services from one country to another.

Detailed explanation-2: -One important thing the International Monetary Fund does is to help member countries cope with foreign exchange shortages caused by balance of payments problems.

Detailed explanation-3: -The IMF provides loans to member countries experiencing actual or potential balance of payments problems to help them rebuild their international reserves, stabilize their currencies, continue paying for imports, and restore conditions for strong economic growth, while correcting underlying problems.

Detailed explanation-4: -By providing deficit-laden countries with short-term foreign currency loans, IMF funds would buy time for countries to bring down their inflation rates and reduce their balance-of-payments deficits.