|Consider the following statements|
|1. Tobin tax is a tax on all spot conversions of one currency to 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
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :A Tobin tax, suggested by Nobel Memorial Prize in Economic Sciences Laureate economist James Tobin, was originally defined as a tax on all spot conversions of one currency into another. The tax is intended to put a penalty on short-term financial round-trip excursions into another currency.
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