Vecka 3 föreläsningar del 7

Question 1

What does Internal balance mean?

Answer 1

Full employment and Price level stability.

Question 2

What is the Definition of internal balance?

Answer 2

All available labour resources are being used in the most economically efficient Way. The economy is operating at its maximum Potential output, minimizing the waste of resources and maximizing Productivity.

Question 3

Why is keeping internal balance A complex task?

Answer 3

due to challenges like:
- Inflation-unemployment tradeoff.
- Lagged effects of policies.
- Supply shocks.
- Structural changes in the economy.
- Policy constraints
- Global influences.

Question 4

What is External balance?

Answer 4

The optimal level of the current account.

Question 5

What is the Definition of external balance?

Answer 5

A situation where a country’s current account is at an optimal level. Then the country’s international trade and financial transactions are in equilibrium, ensuring Sustainable economic growth and stability.

Question 6

What does countries do to achieve external balance?

Answer 6

use exchange rate Policies like:
- monetary,
- fiscal policies
- Structural reforms.

Question 7

What are some Challenges in maintaining external balance?

Answer 7

• Global economic conditions
• Capital flows
• Policy coordination.

Question 7

What is the Open-economy trilemma?

Answer 7

Countries can only Choose to maintain two of the three:
- Exchange rate stability
- Freedom of financial flows
- Monetary policy autonomy.

Question 8

What does policy makers try to do In an open economy?

Answer 8

maintain internal and external balance.

Question 9

How can we understand The limitations of alternative exchange rate regimes?

Answer 9

in terms of the open-economy monetary trilemma