Analysis of Open and Closed Economies

Analysis of Open and Closed Economies Table of Contents (Jump to) TASK1 1.0 DEFINITION OF OPEN ECONOMY AND CLOSE ECONOMY 1.1 DIFFERENCES BETWEEN OPEN ECONOMY AND CLOSE ECONOMY 1.2 COUNTRY WHO PRACTISE OPEN ECONOMY AND CLOSE ECONOMY 1.3 CONSUMPTION AMONG OPEN ECONOMY AND CLOSE ECONOMY 1.4 INVESTMENT AMONG THE OPEN ECONOMY AND CLOSE ECONOMY 1.5 IMPORT AMONG THE OPEN ECONOMY AND CLOSE ECONOMY TASK2 2.0 UTILIZE 2.1 WEALTH DISTRIBUTION 2.3 FOUR PRODUCTION FACTORS EFFICIENTLY AMONG WEALTH DISTRIBUTION 2.4 INTRODUCE NEW TECHNOLOGY AMONG WEALTH DISTRIBUTION 2.5 INVESTMENT IN NEWPLANT AND EQUIPMENT AMONG WEALTH DISTRIBUTION 2.6 ENSURE SUFFICIENT DEMAND AND SUPPLY FOR PRODUCTS AMONG WEALTH DISTRIBUTION 3.0 CONCULUSION 4.0 REFERENCES TASK1 1.0 DEFINITION OF OPEN ECONOMY AND CLOSE ECONOMY An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, an d flow of funds as investment across the border. Trade can be in the form of managerial exchange, technology transfers, all kinds of goods and services. Although, there are certain exceptions that cannot be exchanged, like, railway services of a country cannot be traded with another to avail this service, a country has to produce its own. This contrasts with a closed economy in which international trade and finance cannot take place. The act of selling goods or services to a foreign country is called exporting. The act of buying goods or services from a foreign country is called importing. Together exporting and importing are collectively called international trade. There are a number of advantages for citizens of a country with an open economy. One primary advantage is that the citizen consumers have a much larger variety of goods and services from which to choose. Additionally, consumers have an opportunity to invest their savings outside of the country. In an open economy, a coun try’s spending in any given year need not to equal its output of goods and services. A country can spend more money than it produces by borrowing from abroad, or it can spend less than it produces and lend the difference to foreigners. There is no closed economy in today’s world. An economy in which no activity is conducted with outside economies. A closed economy is self-sufficient, meaning that no imports are brought in and no exports are sent out. The goal is to provide consumers with everything that they need from within the economy’s borders. A closed economy is the opposite of an open economy, in which a country will conduct trade with outside regions. 1.1 DIFFERENCES BETWEEN OPEN ECONOMY AND CLOSE ECONOMY 1.2 COUNTRY WHO PRACTISE OPEN ECONOMY AND CLOSE ECONOMY American countries in adopting open economy and free and other trade practices or the United States an open economy is the opposite of a managed economy. It is one that is characteristically market- oriented, with free market policies rather than government-imposed price controls. In an open economy industries tend to be privately owned rather than owned by the government. In the area of international trade an open economy is one whose policies promote free trade over protectionism .On the other hand, a managed or closed economy is characterized by protective tariffs, state-run or nationalized industries, extensive government regulations and price controls, and similar policies indicative of a government-controlled economy. In a managed economy the government typically intervenes to influence the production of goods and services. In an open economy, market forces are allowed to determine production levels. A completely open economy exists only in theory. For example, no country in the world allows unlimited free access to its markets. Most nations have fiscal and monetary policies that attempt to improve their economies. Many economies that are open in some respects may still h ave government owned, monopolistic industries. A country is considered to have an open economy, however, if its policies allow market forces to determine such matters as production and pricing.