Final answer:
A nation has external balance when its current account has neither deficits nor surpluses, indicating a stable trade relationship with other countries without excessive borrowing or lending.
Step-by-step explanation:
A nation experiences external balance when it achieves neither deficits nor surpluses in its current account. This is the scenario where the value of exports is equal to the value of imports, and there is neither a trade surplus nor deficit.
The current account balance is a broad measure that includes trade in goods and services, as well as international flows of income and foreign aid.
When a country's exports of goods and services are perfectly matched by its imports, it means that the country’s consumption of goods and services from abroad is fully funded by what it sells abroad, indicating a stable economic relationship with the rest of the world.
It is important to understand that while balanced trade is an indicator of external balance, this does not necessarily equate to identical productivity levels with trading partners (B), no net changes in international gold stocks (C), or consistently having a trade surplus (D). Achieving external balance is a desirable economic condition as it suggests a country is not excessively borrowing from, nor lending to, the rest of the world.