Closed Economy and Open Market Economy


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.


Closed Economy


A closed economy is a self-contained economic unit that has no business or trading relations with anyone outside of that unit. It is an economy that does not interact with the economy of any other country. A closed economy prohibits imports and exports, and prohibits any other country from participating in their stock market.There have been many examples throughout history, but very few closed economies exist today. They are also called autarky. The goal is to provide consumers with everything that they need from within the economy's borders. 
Closed economies are more likely to be less developed if they lack internal sources of some raw materials, such as oil, gas and coal. 
Thus a closed economy  neither exports goods and services to the foreign countries nor imports goods and services from the foreign countries.It neither buys shares, debentures, bonds etc. from foreign countries nor sells shares, debentures, bonds etc. to foreign countries. It neither borrows from the foreign countries nor lends to the foreign countries.It neither receives gifts from foreigners nor sends gifts to foreigners. Normal residents of a closed economy cannot go to other countries to work in their domestic territory. No foreigner is allowed to work in the domestic territory of a closed economy.
Due to the prevalence of international trade, truly closed economies are rare. Even governments that seek to limit the political or cultural influences of the outside world are likely to trade with other economies on some scale.
A closed economy is the opposite of an open economy, in which a country will conduct trade with outside regions.


Open Market Economy


An economic system with no barriers to free market activity. An open market is characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization and any other regulations or practices that interfere with the natural functioning of the free market. Anyone can participate in an open market. There may be competitive barriers to entry, but there are no regulatory barriers to entry.
An open market is the opposite of a closed market - that is, a market one with a prohibitive number of regulations restricting free market activity. Most markets are neither truly open nor truly closed, but fall on a continuum somewhere between the two extremes. The United States would be considered to have a relatively open market, while North Korea would be considered to have a relatively closed market.






Saturday, 09th May 2015, 09:53:41 PM

Add Your Comment:
Post Comment