As long as the FE curve is vertical, internal and external balance can be achieved by using the appropriate mix of monetary and fiscal policy.

Question

Quizplus · Accepted Answer

When the FE curve is vertical, it indicates that the economy is at full employment, and output cannot be increased by domestic policy measures. Achieving both internal and external balance under these conditions would require adjustments in exchange rates or in foreign demand, not just domestic fiscal and monetary policies.

As Long as the FE Curve Is Vertical, Internal and External