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"To achieve both internal and external balance the authorities must use both expenditure switching and expenditure changing policies." Discuss
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"To achieve both internal and external balance the authorities must use both expenditure switching and expenditure changing policies." Discuss. Internal and external balances are two of the most important economic goals or objectives for a country. (The others include a reasonable rate of growth, an equitable distribution of income and, adequate protection of the environment). Internal balance " refers to full employment or rates of unemployment no more than 4 - 5 per cent" (Salvatore). The 4 - 5 per cent allows for frictional unemployment, that is the transition period between changing jobs and allows for re-training for workers. External balance refers to equilibrium in the balance of payments - " or a desired temporary disequilibrium such as a surplus that a nation may want in order to replenish its depleted international reserves". (SALVATORE) Most nations will prioritise internal balance rather than external balance, however in certain circumstances they may be forced to...
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