A citizen in a developing country with a currency policy of convertibility on the current account could engage in all of the following transactions except:
A)purchase foreign currency in order to import a BMW.
B)sell foreign currency resulting from the exports of manufactured t-shirts.
C)purchase foreign currency in order to purchase a U.S. treasury bond.
D)sell foreign currency resulting from the sale of a U.S. treasury bond.

Question

Quizplus · Accepted Answer

Currency convertibility on the current account allows for the exchange of currency for international transactions related to goods and services (like importing a BMW or exporting t-shirts). However, it does not necessarily allow for currency conversion for capital account transactions, such as purchasing foreign securities like U.S. treasury bonds.

A Citizen in a Developing Country with a Currency Policy