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Business Studies

Dividend Decision

Consider the ...

Question

Consider the following statements:
(1) Tobin tax is a tax on all spot conversions of one currency into another.
(2) Tobin tax is a currency transaction tax to find a way to manage exchange rate volatility.
Which of the statements given above is/are correct?

A

Only 1

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B

Only 2

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C

Both 1 and 2

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D

Neither 1 nor 2

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Solution

The correct option is C Both 1 and 2
Tobin tax is applied to all spot exchange conversions of one currency into another. It is applied to all such short term transactions to discourage such trading which induces volatility in the currency.

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