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Questions › UGC-NET › UGC-NET 2023 › Q50
2 marksInternational Economics › Open-economy macroeconomics › The impossible trinity and exchange rate dynamicsHardabout 2 min

UGC-NET 2023 Question 50: Open-economy macroeconomics

Which of the following statements are correct about the trilemma in monetary policy?

A. It is related to a closed economy model.

B. It involves exchange rate, capital mobility and monetary policy.

C. It arises because perfect capital mobility aligns the domestic interest rate to the world interest rate.

D. Flexible exchange rate is not compatible with independent monetary policy.

E. It is related to capital immobility and flexible exchange rate.

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Answer and worked solution

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Open-economy macroeconomics has come up 55 times in 7 exams since 2006.

What this question tests

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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