The Macroeconomic Objectives of Government

External Balance

The objective for external balance is basically to keep the exchange rate at a desirable and stable level. For example, a high exchange rate is far better than one which doesn’t move up and down. There are reasons why we would like to keep a stable exchange rate, one being, say we wanted to plan for the future, if the exchange rate is always around the same price, this would be far easier, we need to plan for the future and make predictions for future imports and exports. The exports and imports need to have some kind of balance between them. No economy wants to have more goods coming into the country tha...