Which of the following is one component of the "trilemma" that is faced by policy makers in choosing monetary arrangements?
A) freedom of international capital movements
B) exchange rate instability
C) tariffs and subsidies
D) restrictions on the migration of labor
E) global inflation

Question

Quizplus · Accepted Answer

The "trilemma" in international economics, 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 (absence of capital controls), and an independent monetary policy. "Freedom of international capital movements" is one of the components of this trilemma, as it conflicts with the ability to have both a fixed exchange rate and an independent monetary policy simultaneously.

Which of the Following Is One Component of the "Trilemma