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About: Internal balance     Goto   Sponge   NotDistinct   Permalink

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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, II = C (Yf - T) + I + G + CA (E x P*/P, Yf-T; Yf* - T*)Internal balance = Consumption [determined by disposable income] + Investment + Government Spending + Current Account (determined by the real exchange rate, disposable income of home country and disposable income of the foreign country). XX = CA (EP*/P, Y-T, Yf* - T*)External balance = the right amount of surplus or deficit in the current account.