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Business, 11.12.2019 19:31 brylove5490

Policy makers around the world often face an "open-economy policy trilemma": 1. they want to fix the nominal exchange rate to promote international trade; 2. they want capital mobility to achieve gains from international borrowing and lending; 3. they want to engage in active monetary policy to stabilize domestic output. (a) using the concepts you have learned in class, explain why this is a trilemma, i. e. why only two of the three objectives can be achieved at any point in time. (b) how does your answer in part (a) us think about why both the gold standard and the bretton woods system eventually failed?

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