Question

Which does not belongs to an adjustment mechanism?​

Answer 1

Answer:

We might perhaps begin by asking what would be the tests of an

ideal or, at least, a generally successful adjustment process. I should

like to suggest three.

First, no individual country’s external surpluses or deficits should

be too large or too prolonged. Secondly, the correction of such

surpluses and deficits as do occur should be achieved in ways which

do not impose either on individual countries or on the world as a

whole, unacceptable inflation or deflation or physical restrictions on

trade and payments. Thirdly, the maximum sustainable expansion of

trade and activity in both individual economies and in the world as a

whole should be facilitated.

Of course, as I have stated them these tests would need to be more

explicit: one would have to define - or reach international agree-

ment upon - what was the precise meaning of the expressions "too

large, .... too prolonged," and "unacceptable." There will always be

room for argument and for legitimate differences of opinion on these

matters, for what is involved is the achievement of a number of

different aims many of which may conflict, and to which different

Sir Parsons is Deputy Governor, Bank of England, London, England.