• A structure, which protects its geometry, when all kinds of forces tend to deform is termed as internal stability. • The arrangement and the number of members of a structure, which does not change when detached from the supports is termed as internal stability.
What is internal balance in economics?
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,
What is meant by internal stability?
• Internal stability is achieved if each joint in truss is constraint against rigid body motion. • In earth-retaining wall construction, internal mechanism such as shear within the structure, arrangement and behaviour of the reinforcement and backfill is covered by the internal stability.
What is stability in economics?
The concept of stability in economics is closely related to the concept of equilibrium and is one of the three properties of equilibrium that is routinely studied by economic theorists (the others being uniqueness and existence). Economists typically use the term stability to denote what mathematicians call asymptotic stability.
What is the appropriate use of fiscal and monetary policy for stability?
The Appropriate Use of Fiscal and Monetary Policy for Internal and External Stability, but also attempted to provide an answer to a very crucial question concerning the policy priorities in different economic situations like internal unemployment and inflation coupled with external surplus or deficit.
What is internal and external balance of a country?
Both internal balance and external balance depend on two fundamental variables—the level of real domestic demand and the real exchange rate—which, in turn, reflect underlying economic conditions and macroeconomic policies.
What is internal balance?
a situation where the economy is operating at FULL EMPLOYMENT and the general level of prices is constant (PRICE STABILITY). The achievement of full employment and price stability are two important macroeconomic objectives of the government.
What is external balance?
Definition: The external balance of goods and services is the value of exports of goods and services less imports of goods and services.
How do you maintain economic stability?
Monetary policy In addition to these automatic stabilisers, short-term stability can be maintained by altering monetary conditions, such as raising or lowering interest rates, or by expanding or contracting the money supply. Most national economies and monetary unions review monetary policy on an ongoing monthly basis.
Is inflation internal or external?
Inflation in a small- open economy can be influenced by both internal and external factors. Internal factors include, among others, government deficits, debt financing, monetary policy, institutional economics (shirking, opportunism, economic freedom, risk, etc.)
Why external balance is important?
An external balance implies capital movement. That is, a country needs to have both imports and exports to maintain an external balance; it is not sufficient simple to note no balance by not buying and selling goods. An external balance is considered sustainable.
What is price stability?
Price stability is the condition in which the domestic currency retains its purchasing power by maintaining low and stable inflation as measured by the Consumer Price Index over the medium term (from 3 to 5 years). Price stability does not imply that prices do not change; it means that prices grow at a moderate pace.
What is perfect capital mobility?
Definition of 'Perfect Capital Mobility' Perfect Capital Mobility means that an enormours quantity of funds will be transferred from one currency to another whenever the rate of return on assets in one country is higher than in another.
Who developed model for internal and external balance in international trade?
One of their goals is to explain the insights that John Maynard Keynes provided on the workings of the global balance of payments as they work through the development of Keynes' thinking in real time.
What is economic stability?
Economic stability means that people have the resources essential to a healthy life. Factors affecting economic stability include affordable housing; employment that provides a living wage; things that support employment, like worker protections, paid sick leave, and child care; and access to reliable transportation.
What are the factors that give a nation economic stability?
Economists generally agree that economic development and growth are influenced by four factors: human resources, physical capital, natural resources and technology. Highly developed countries have governments that focus on these areas.
What is the importance of stability to trade?
Price stability supports higher living standards by reducing uncertainty about general price developments, thereby improving the transparency of the price mechanism. It makes it easier for consumers and companies to recognise price changes which are not common to all goods (so-called “relative price changes”).
Which policy should be directed to correct external disequilibrium?
Hence the monetary policy should be directed to correct external disequilibrium, while the fiscal policy should be used to correct internal disequilibrium. Any departure from such policy priorities will aggravate further the internal and external instability.
Which principle has an edge over monetary policy in the achievement of external balance?
Mundell has termed it as the principle of, effective market classification, according to which “an instrument should be matched with the target on which it exerts the greatest relative influence.”.
Why is it so difficult to adopt restrictive fiscal policies?
Certain governments may find it difficult, for political reasons, to adopt restrictive fiscal policies. Similarly monetary authorities may also be under constraints and find it difficult to adopt restrictive monetary policies involving reduction in money supply and increase in the structure of interest rates.
Why should monetary policy be reserved?
“It has been demonstrated that, in countries where employment and balance of payments policies are restricted to monetary and fiscal instruments, monetary policy should be reserved for attaining the desired level of the balance of payments, and fiscal policy for preserving internal stability under the conditions assumed here.”
What do the monetary and fiscal authorities know?
First, the monetary and fiscal authorities have the full knowledge of the extent to which the economy is away from the external and internal stability so that the appropriate monetary and fiscal policies can be applied. Second, the authorities exactly know the quantitative results that each policy can lead to.
What is the effect of a high interest monetary policy on domestic investment?
Twelfth, a high interest monetary policy applied to achieve internal and external stability may cause a decrease in domestic investment. It has to be off-set through tax reduction or increased government spending or both. Such fiscal actions can involve the government in more and more debts.
Is fiscal policy lag long?
The fiscal policy lags are quite long and they reduce considerably its effectiveness in restoring the internal and external equilibria. ADVERTISEMENTS: Tenth, the monetary-fiscal policy mix is only a palliative. It does not provide a true adjustment process.
What are expenditure-changing policies?
ADVERTISEMENTS: The expenditure-changing policies can be split up into monetary and fiscal policies. The fiscal policies which can be represented by the national budget whether, deficit or surplus can have its effect upon both internal and external balances. The monetary policy can influence the balances in two ways.
How does monetary policy affect balance of payments?
The monetary policy can influence the balances in two ways. Firstly, the variations in interest rates affect business investment which through multiplier, affect also the consumption spending. Secondly, the interest variations cause movements in short term capital and can thus influence the balance of payments situations in the country. ...
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You are on a site visit of an area that shows various karst topography. The area shows emergent streams and caves. 1. What potential hazard (s) would you expect to be in this area? [2 marks) 2. Would you be able to bu...
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