A country has an internal and external balance when
A)it has a trade surplus and a budget surplus
B)the trade balance is zero and the government budget is balanced
C)net exports and the inflation rate are both zero
D)the trade balance and the unemployment rate are both zero
E)the trade balance is zero and output is at the full-employment level

Question

Quizplus · Accepted Answer

A country has an internal balance when its output is at the full-employment level, which means that there is no cyclical unemployment. A country has an external balance when its trade balance is zero, meaning that its exports and imports are in equilibrium. Therefore, a country has an internal and external balance when the trade balance is zero and output is at the full-employment level, which is described in option E.

A Country Has an Internal and External Balance When