By the end of this chapter, students should be able to:
- Define the impossible trinity, or trilemma, and explain its importance.
- Identify the four major types of international monetary regimes and describe how they differ.
- Explain how central banks manage the foreign exchange (FX) rate.
- Explain the benefits of fixing the FX rate, or keeping it within a narrow band.
- Explain the costs of fixing the FX rate, or keeping it in a narrow band.