Explain what is meant by the term impossible trinity, and why it is true.
Answer to relevant QuestionsFixed exchange rate regimes are sometimes implemented through a currency board (Hong Kong) or through dollarization (Ecuador). What is the difference between the two approaches? Classify the following as a transaction reported in a sub-component of the current account, or the capital and financial accounts of the two countries involved? Why does the BOP always “balance”? What organizations appear to be the most exposed to the declining value of eurozone sovereign debt? Define the following terms: • Foreign exchange market • Foreign exchange transaction • Foreign exchange
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