National Income and Flow-of-Funds Analysis

By John P. Powelson | Go to book overview

Chapter 21
INTERNAL AND EXTERNAL EQUILIBRIUM

INTERNAL AND EXTERNAL EQUILIBRIUM DEFINED

Just as economic instability tends to spread from industry to industry or from city to city, so also does it spread from nation to nation. No matter how large or how small it is, a nation undergoing either unemployment or inflation cannot help but detract from the stability of its trading partners. In an inflation residents tend to buy abroad rather than at home, because prices are lower in other countries; for the same reason foreigners shy away from buying exports of the country concerned. Because of both increased imports and decreased exports, a balance-of-payments deficit ensues, and the inflationary demand is transmitted to other countries. Conversely in a depression, when prices and incomes fall, residents tend to buy less of all goods, both domestic and foreign; the decrease in their imports adversely affects the national income of foreigners. The relatively greater decline in the prices of the depression country, as opposed to other countries, further encourages a decrease in its residents' imports, helping spread the depression to other countries.

In earlier chapters we have defined equilibrium as the point at which transactions tend to repeat themselves indefinitely, for there is no force calling for increase or decrease in any of the variables. Now, however, we discover that this type of equilibrium is only part of the complex of economic transactions, and we must refer to it in a more narrow way. Let us call it internal equilibrium. So long as propensities to consume, import, save, and invest are such that consumption, imports, saving, and investment remain the same from period to period and foreigners' demand for exports does not change, the conditions of internal equilibrium are satisfied. Nowhere among the functional relationships that define equilibrium is there any indication that exports must equal imports, or that trade deficits must be offset by voluntary (or ex ante) international capital movements. The balance of payments may be in surplus or deficit indefinitely, without disturbing the conditions of internal equilibrium.

-461-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
National Income and Flow-of-Funds Analysis
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 556

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.