How an economy can achieve both external and internal balance under a fixed exchange rate regime?
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external balance
External Balance
A situation in which the money a country brings in from exports is roughly equal to the money it spends on imports. That is, external balance occurs when the current account is neither excessively positive nor excessively negative. 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. See also: Internal balance.
Internal balance = Consumption [determined by disposable income] + Investment + Government Spending + Current Account (determined by the real exchange rate, disposable income of home country and disposable income of the foreign country).
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