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The Impossible Trinity (or Trilemma) in international

Q: Answer-The Impossible Trinity (or Trilemma) in international finance states that a country cannot simultane...

The Trilemma states that only two of the following three are possible 1 Fixed Exchange Rate, 2 Free Capital Mobility, and 3 Independent Monetary Policy. For example, to maintain a fixed exchange rate with open capital flows, domestic interest rates must align with world rates, sacrificing monetary independence.

finance states that a country cannot simultaneously have:

A Fixed exchange rates, free capital flows, and fiscal autonomy.

B Fixed exchange rates, free capital flows, and an independent monetary policy.

C Floating exchange rates, capital controls, and trade surplus.

D Full employment, price stability, and current account balance.

E Independent monetary policy, fiscal policy, and exchange rate policy.

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The Impossible Trinity (or Trilemma) in international

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