Internal balance in economics is a state in which a country maintains full employment and price level stability. Under a system of floating exchange rate and high capital mobility, monetary policy is better suited for promoting internal balance, though fiscal policy can also be used. The reason for that can be seen using the following example.
Suppose the economy under consideration faces increasing inflation and you want to bring it down to a more acceptable level. One way to do that will be to raise interest rates. Higher interest ...
A system of floating (flexible) exchange rates and high capital mobility is contextualized.