The Particular Policy Mix to Achieve Internal and External Balance

[Name of the Institute]

The Particular Policy Mix to Achieve Internal & External Balance

Introduction

It is crucial for policy makers to achieve macroeconomic stability in the country, even if it is a flourishing country like the United States of America. In fact, a country like the USA needs to focus more on its policies if it wants to achieve internal and external balance in terms of the economy. USA has one of the most dynamic economies, complimented by the fact that the currency of the USA is the one that is kept as the base for all other currencies all around the world.

Discussion

There are two goals that policy makers are supposed to achieve when it comes to keeping a balance in the internal as well as external economy of the USA. Internal balance for USA would come in the form of the level of potential output that the country would be able to generate. Therefore, there would be a critical need to maintain ideal employment in the country and stable price levels. External balances, on the other hand, would come when USA is able to achieve ideal current account situations, that is, there should be no deficit in the current accounts and there should not be much surplus either. In other words, the net exports would be close to zero. The American economy could supplement its GDP (Gross Domestic Product) by increasing its exports. The reliance of the American economy on imports from China and other countries of Central Asia tend to have a negative effect on the economy (Wong, 2010).

According to the Swan diagram, one of the most famous tools used to make policies in the US for achieving internal and external balances (equilibrium), the things needed to achieve this level of ...