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Differentiate between autonomous capital flow and accommodating capital flow. - Economics

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Question

Differentiate between autonomous capital flow and accommodating capital flow.

Distinguish Between
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Solution

Autonomous capital flows are capital flows that occur due to normal economic considerations, such as interest and dividend earnings, whereas accommodating capital flows are those flows made specifically to bring the balance of payments into equilibrium.

Example: If there is a deficit in the current account, it can be settled by flexible capital inflow.

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