From Latinoeconomia, from Ancient Greekοἰκονομία (oikonomía, “management of a household, administration”), from οἶκος (oîkos, “house”) + νόμος (nómos, “law”) (surface analysis eco- + -nomy). The first recorded sense of the word economy, found in a work possibly composed in 1440, is “the management of economic affairs”, in this case, of a monastery.
An economy open to free movement of capital can keep a fixed exchange rate, for example, only by subjugating monetary-policy goals to its defence—by raising interest rates sharply, say, when capital outflows put downward pressure on the currency. Yet the trilemma also implies that an economy can enjoy both free capital flows and an independent monetary policy, so long as it gives up worrying about its exchange rate.
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