A. Fixed exchange rate
B. Independent monetary policy
C. Free mobility of capital
D. Global recessionary tendency
E. Rising inflationary conditions
Choose the correct answer from the options given below:
Understanding the International Finance Trilemma
The question asks about the constituents of the trilemma in international finance, also known as the "impossible trinity". This economic principle states that a country cannot simultaneously achieve all three of the following objectives:
- A. A fixed exchange rate
- B. An independent monetary policy
- C. Free mobility of capital
Countries must choose which two of these three conditions they want to pursue, as achieving all three is impossible. For example, a country with free capital mobility and a fixed exchange rate cannot set its own independent monetary policy. Conversely, a country with an independent monetary policy and free capital mobility must allow its exchange rate to float.
Identifying Trilemma Constituents
Based on the definition of the impossible trinity:
- Option A (Fixed exchange rate): This is a core component of the trilemma.
- Option B (Independent monetary policy): This is another core component.
- Option C (Free mobility of capital): This is the third core component.
- Option D (Global recessionary tendency): This describes a macroeconomic condition, not a policy choice related to the trilemma's framework.
- Option E (Rising inflationary conditions): This also describes a macroeconomic condition, not a policy choice within the trilemma itself.
Therefore, the constituents of the trilemma are options A, B, and C.
Conclusion
The correct combination representing the constituents of the trilemma of international finance is A, B, and C only.
Important Questions from Business Finance
Match List I with List II
List I
List II
Option strategies
Description(s)
A.
Protective put
I.
Buying an asset along with a put on it
B.
Covered call
II.
Buying a call as well as put options on an asset at the same exercise price
C.
Long straddle
III.
Combining two or more options on the same asset with differing exercise prices or times to maturity
D.
Spread
IV.
Writing a call position on an asset along with buying the asset
Choose the correct answer from the options given below:
- Match List I with List II
List I List II Bond rates and risk Description A. Coupon rate I. The interest rate required in the market on a bond B. Yield to maturity II. It is obtained by dividing annual coupon (stated interest payment) by the bond price C. Interest rate risk III. It germinates and originates from fluctuating interest rates D. Current (bond) yield IV. The annual coupon (stated interest payment) divided by the face value of a bond
Chose the correct answer from the option given below: - The primary parties to the securitisation deal include
"Which of the following included as the primary parties to the securitization deal". - Which of the following is not the part of components of Investment Portfolio ?
- Match List - I with List - II.
List - I List - II (Type of Risk) (Uncertainty of Future Returns) (A) Financial Risk (I) Investor Psychology (B) Market Risk (II) Capital Market (C) Purchasing Power Risk (III) Financial Capacity (D) Political and Social Risk (IV) Price Level
Choose the correct answer from the options given below :
