Internal balance

Internal balance in economics is a state in which a country maintains full employment and price level stability. It is a function of a country's total output, Internal balance in economics is a state in which a country maintains full employment and price level stability. It is a function of a country's total output, External balance signifies a condition in which the country's current account, its exports minus imports, is neither too far in surplus nor in deficit. It is signified by a level of the current account which is consistent with the maintenance of existing (or growing) levels of consumption, employment and national output over the long term. It is notated by Maintaining both internal and external balances requires use of both monetary policy and fiscal policy. That is one reason why floating exchange rates may be superior to fixed exchange rates. Under fixed exchange rates, governments are not usually free to employ monetary policy. Under floating rates, countries can use both.