What is the nature of the trilemma that is encountered when choosing monetary arrangements?
A) Only two of the three aspects of internal and external balance can be accommodated simultaneously.
B) Only three of the four aspects of internal and external balance can be accommodated simultaneously.
C) Only one of the three aspects of internal and external balance can be accommodated simultaneously.
D) Only two of the four aspects of internal and external balance can be accommodated simultaneously.
E) Only one of the four aspects of internal and external balance can be accommodated simultaneously.

Question

Quizplus · Accepted Answer

The trilemma, also known as the impossible trinity, states that it is impossible to have all three of the following at the same time: a fixed foreign exchange rate, free capital movement, and an independent monetary policy. Therefore, only two of these three aspects can be accommodated simultaneously, which relates to achieving internal and external balance in monetary arrangements.

What Is the Nature of the Trilemma That Is Encountered