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Achieving internal balance

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(i) Assume that Singapore is currently achieving internal balance, but experiencing a trade surplus. Also assume that Singapore faces a relatively elastic IB schedule and a relative inelastic EB schedule. Explain how and why an attempt to restore external balance will disrupt internal balanceand how internal balance would be restored.

(ii) Assume that Malaysia is currently achieving internal balance, but experiencing a trade deficit. Also assume that Malaysia faces a relatively inelastic IB schedule and a relatively elastic EB schedule. Explain how and why an attempt to restore external balance will disrupt internal balance and how internal balance would be restored.

Reference no: EM131704562

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