The "Impossible Trinity" Refers to the Idea That a Country

question 64

Essay

The "impossible trinity" refers to the idea that a country can simultaneously pursue only two of the three following policies: free international-capital flows, monetary policy for domestic stabilization, and a fixed exchange rate. For each of the following combinations indicate what the economy gives up by selecting the combination and why the omitted policy cannot be achieved: a. a fixed exchange rate and free internati onal -capital flows
b. a monetary policy for domestic stabilization and a fixed exchange rate
c. a monetary policy for domestic stabilization and free international-capital flows

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Definitions:

Irritable

Having a tendency to be easily annoyed or made angry.

Sleepless Nights

Periods of little to no sleep, often resulting from stress, anxiety, or health issues, potentially leading to a variety of cognitive and physical effects.

Obsessions

Persistent, unwanted thoughts or urges that cause distress or anxiety.

Offensive

Relating to something that causes someone to feel hurt, angry, or upset; also can refer to an attacking action in a military or sports context.