Open Economy vs. Closed Economy
1. Open Economy vs. Closed Economy •Open Economy A country has an open economy if it is joining international trade, which exporting and importing are collectively together. Selling or buying of goods or services to a foreign country is allowed in this kind of economy. The Market-economy is mostly free from trade barriers and where exports and imports form a large percentage of the GDP. Imports give citizens of a country access to products and services provided by other nations, which allows for more consumer freedom because people have a wider range of choices.
Exports allow companies and citizens to break into other markets to find new buyers for their products. Consumers also have an opportunity to invest their savings outside of the country. The open economy actively encourages importing any goods or services that cannot be produced domestically at competitive prices. The open economy motivates the interaction in a global community. •Closed Economy Closed economy focuses on all economic transactions inward rather than outward. No activity conducted with outside economies.
The idea behind the closed economy is to meet all consumer needs with the purchase and sale of goods and services that are produced within the economy’s borders. In addition to meeting the needs and desires of all consumers within the economy, the method also excludes the possibility of exporting goods and services. Thus, the economy is considered to be completely self-sufficient, meaning that no imports are brought in and no exports are sent out. Closed economy is definitely built on the concept of isolation from other countries.