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    Question

    The impossible trinity is a concept in international economics which states that it is impossible to have all three of the following at the same time

    I. Fixed Exchange Rate

    II. Flexible Exchange Rate

    III. Independent Fiscal Policy

    IV. Independent Monetary Policy

    V. Perfect Capital Mobility

    A I, III and V Correct Answer Incorrect Answer
    B II, IV and V Correct Answer Incorrect Answer
    C I, II and V Correct Answer Incorrect Answer
    D None of the above Correct Answer Incorrect Answer

    Solution

    The impossible trinity, or the trilemma, refers to the idea that an economy cannot pursue independent monetary policy, maintain a fixed exchange rate, and allow the free flow of capital across its borders at the same time.

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