Pakistan has historically faced external account crises. More often, the policy makers have opted for currency depreciation as a policy tool to check the deteriorating balance of payment situation.

a. Explain the merits and demerits of such exchange rate policy. [20 points]

b. Could Pakistan's external account situation be improved with capital controls instead? [20 points]

c. Pick any side of the 'Impossible Trinity' and explain why you would choose that option for the Pakistan economy. [30 points]

For Question 2, you could use knowledge from the following paper "Mahmood, M. (2020). Pakistan's Balance-of-Payments Crisis and Some Policy Options Moazam Mahmood and Shamyla Chaudry. Lahore Journal of Economics, 25(2), 55-92."