Question

1) Explain what is meant by the term impossible trinity and discuss example countries

that adopt policy consistent with such term

Answer 1

Impossible trinity or trilemma in monetary policy means that a country cannot have a fixed exchange rate, free movement of capital and an independent monetary policy at the same time.

Step-by-step explanation:

In real-life examples, as the market players reach the point where they suspect the government is running out of the reserves to defend its currency, they will pile in with direct speculative attacks where they borrow and sell the nation's currency without bothering with carry trades, leading to a quick profit once the inevitable devaluation occurs.

I hope is helpful