What is the incompatible trinity?

Answer 1

It is the concept in economics that a country can attain only two of the following conditions:

1. A fixed exchange rate

2. Free international flows of capital

3. Independant monetary policy

It is very difficult, if not impossible, to have all three conditions.

Answer 2

The incompatible trinity, also known as the impossible trinity or the trilemma, is an economic concept that states that it is impossible to have all three of the following simultaneously: a fixed foreign exchange rate, free capital movement, and an independent monetary policy. If a country tries to have all three, it will have to give up one of them. For example, if a country wants to maintain a fixed exchange rate, it will have to sacrifice free capital movement or an independent monetary policy.