internal balance

Internal Balance

A situation in which the consumption in an economy roughly equals production. That is, external balance occurs when what is spent and what is produced in the economy are never too far from being even. Internal balance may be characterized by both full employment and low inflation, though not all economists believe this is possible. Maintaining internal balance is considered sustainable. See also: External balance.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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. In practice, it is difficult to secure both objectives simultaneously (see PHILLIPS CURVE). Compare EXTERNAL BALANCE. See also DEMAND MANAGEMENT, INTERNAL-EXTERNAL BALANCE MODEL, MACROECONOMIC POLICY.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005