External balance refers to
A)an economy which is on its LM curve.
B)an economy which is on its IS curve.
C)an economy which is on its BP curve.
D)All of the above.

Question

Quizplus · Accepted Answer

External balance refers to an economy which is on its BP (balance of payments) curve, which shows the relationship between a country's exports and imports of goods and services and the exchange rate. A point on the BP curve is a point where the current account balance is equal to the capital account balance, meaning that there is no need for an adjustment in the exchange rate to maintain balance. Being on the BP curve implies external balance, whereas being on the IS or LM curves only indicates internal balance in the economy.

External Balance Refers to