Analyze the following statements regarding Exchange Rate Regimes: Statement I: A Fixed Exchange Rate regime is one where the central bank ties the official exchange rate to another country's currency or gold, requiring massive foreign exchange reserves to defend the peg. Statement II: India currently follows a 'Clean Float' exchange rate regime, where the value of the Rupee is determined strictly by market forces without any intervention from the RBI. Statement III: The 'Impossible Trinity' suggests that a country cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. Which of the options below correctly evaluates these statements?

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Economics · Economy

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Statements I and III are correct, while Statement II is incorrect

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Answer 1

Statements I and III are correct, while Statement II is incorrect

Answer 2

Statements I and II are correct, while Statement III is incorrect

Answer 3

Only Statement III is correct

Answer 4

All three statements are correct

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