ABSTRACT
Our discussion has been predicated thus far on the assumption that monetary and fiscal policies could be lumped together insofar as the attainment of internal balance was concerned while exchange-rate adjustment or restrictions on trade and payments have been considered the chief ways of attaining external balance. Suppose, however, that there are constraints on the use of exchange-rate adjustment or restrictions. Does this mean that a country in balance-of-payments difficulty will be rendered helpless? According to Meade (1951), who developed much of this analysis in his pioneering work, the answer to this question was sometimes yes, depending upon the economic circumstances at home and abroad. In other words, a country could find itself faced with a conflict in policies designed to attain both internal and external balance.
