In international economics, there is an idea variously known as 'the impossible trinity' or 'the trilemma' which implies that the three things one might desire from monetary policy in an open economy cannot all be had at the same time.

a. Name these three properties and why they are desirable. [3 marks]

b. Use an IS-LM-IP diagram to demonstrate the effect of expansionary monetary policy with a fixed exchange rate. How does this show that the three properties are incompatible? Explain your answers. [7 marks]