Internal = inside the case
External = outside the case
Hardware = a piece that you can physically put your hands on (even if it's embedded inside another component).
So, look around inside your case - what do you see?
Then, look around the outside of your case - what's attached to it?
Then it becomes a matter of figuring out what is meant by "standard desktop system"? In order to make a system run, you'll need more than 3 internal components - so this may be an opportunity for some extra credit!
Outside the case, there's only 3 things (IMO) that are required - and they'r what Budapest has mentioned.
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