Policymakers around the world often face what Obstfeld and Taylor dubbed a "policy trilemma":
• they want to fix the nominal exchange rate, in order to stabilize the price level;
• they want capital mobility for efficiency and flexibility purposes;
• they want to engage in active monetary policy for output stabilization purposes.
Using the concepts you have learned in class, explain in detail why this is a "trilemma", i.e.
Explain why only two of the three objectives can be achieved at any point in time.