Which of the following is a feature of the 'Impossible Trinity' in open economy macroeconomics?
A. A country can achieve only two of the three: fixed exchange rate, free capital flows and monetary independence
B. Only fiscal policy is constrained
C. All three objectives are always compatible
D. A country can simultaneously maintain a fixed exchange rate, free capital mobility and independent monetary policy
Answer: Option A
Solution (By JKSSB Mock Tests)
The impossible trinity (or trilemma) states that it is impossible for a country to maintain a fixed exchange rate, free capital mobility and an independent monetary policy at the same time.
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