Which of the following constitute the 'impossible trinity' which cannot be simultaneously ensured in an open economy? 1. Fixed exchange rate; 2. Balance in the balance of payments; 3. Free international capital mobility; 4. Independent monetary policy.
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Open-economy macroeconomics has come up 55 times in 7 exams since 2006.
This question is on The impossible trinity and exchange rate dynamics, part of Open-economy macroeconomics in International Economics.
The three goals no country can have together, and overshooting.
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