Differences between Closed Economy and Open Economy

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An economy that does not involve in overseas trade is known as the closed economy and an economy having participation in the international integration in the form of trade and flow of capital as well as other resources is known as an open economy. The major differences between a closed economy and an open economy are shown below. 

BasisClosed EconomyOpen Economy
Socio-economic relationshipA closed economy has no socio-economic relation with the world economy.An open economy has a socio-economic relationship with the rest of the world sector
Economic GuidanceThe closed economy follows the guidelines of the plans of the central governmentThe open economy follows the principles and guidelines of the market economic system
Trade scopeOnly domestic output is traded inside the country and there is the complete absence of international tradeIt keeps trade association with many countries of the world economy. 
Borrowing and lendingThis economy neither borrows nor lendsThis economy borrows and lends funds.
Movement of the labor forceA closed economy does not allow workers to move for foreign employmentIn an open economy movement of workers is allowed and they can move to other countries as per their interest
Foreign aidA closed economy neither takes nor gives foreign loan/aidAn open economy takes and gives foreign aid/loans
FlexibilityA closed economy is rigidThis economy is liberal, open, and flexible
Technology transferThe techniques of production are not transferred from one country to another countryAn open economy transfers techniques and technology of production from one to another country
Degree of competitionThere is no competition or there is very little competitionThere is a higher degree of competition in the open economy.
GDP and GNPThe value of GDP and GNP is identical in the closed economyIn the case of an open economy, NFIA makes differences between GDP and GNP
DependencyThis economy is self-reliant and not dependent on other economies An open economy is dependent on one another in several ways.
Theoretical vs realisticA closed economy is a hypothetical conceptThis economy is real and almost all the economies of the world are open 
Economic sectorsIn the closed economy, there are either two or three sectors onlyIn the case of the open economy, four sectors participated in the economic undertakings 
Differences between a closed economy and an open economy

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