By external balance, most economists mean:

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BlackTom AI · Accepted Answer

Reiterating the question to frame the context: 'By external balance, most economists mean:'
Option 1: 'balance between exports and imports' — This answer captures a facet of external balance, since trade flows influence the current account, but it is not the full, formal definition economists use. External balance encompasses more than just the trade balance; it involves the broader balance of payments and related imbalances.
Option 2: 'full employment and price stability' — These are classic domestic macroeconomic goals (output, employment, and inflation control) rather than external balance. They relate to how an economy performs domestically rather than its international financial position.
Option 3: 'avoiding excessive imbalances in Balnace of Payments' — This statement directly ties to the core idea of external balance: stabilizing the country's overall balance of payments by preventing large deficits or surpluses in international transactions, including trade, capital flows, and reserves. The phrasing, even with the misspelling, points to maintaining a stable external position rather than focusing solely on exports, employment, or domestic price levels.
Additional clarifications to prevent common misconceptions:
- Treating external balance as merely the exports-minus-imports gap overlooks capital flows, the current account, and reserves movements that also matter for the country's international position.
- Equating external balance with domestic employment or inflation would misapply the concept, since those are internal objectives that can be influenced by, but are not the same as, the external balance condition.
- The notion of balancing the external side often involves policies aimed at preventing sustainability issues in the balance of payments, such as persistent current account deficits or volatile capital movements, rather than focusing only on bilateral trade numbers.
In summary, the option that most accurately captures the economists' notion of external balance is the one describing the aim to avoid excessive imbalances in the balance of payments, since that framing encompasses the full international financial position of a country.

By external balance, most economists mean:

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