An economy that does not involve overseas trade is known as a closed economy and an economy having participates in 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.
| Basis | Closed Economy | Open Economy |
| Socio-economic relationship | A 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 Guidance | The closed economy follows the guidelines of the plans of the central government | The open economy follows the principles and guidelines of the market economic system |
| Trade scope | Only domestic output is traded inside the country and there is a complete absence of international trade | It keeps trade associations with many countries of the world economy. |
| Borrowing and lending | This economy neither borrows nor lends | This economy borrows and lends funds. |
| Movement of the labor force | A closed economy does not allow workers to move for foreign employment | In an open economy movement of workers is allowed and they can move to other countries as per their interest |
| Foreign aid | A closed economy neither takes nor gives foreign loan/aid | An open economy takes and gives foreign aid/loans |
| Flexibility | A closed economy is rigid | This economy is liberal, open, and flexible |
| Technology transfer | The techniques of production are not transferred from one country to another country | An open economy transfers techniques and technology of production from one to another country |
| Degree of competition | There is no competition or there is very little competition | There is a higher degree of competition in the open economy. |
| GDP and GNP | The value of GDP and GNP is identical in the closed economy | In the case of an open economy, NFIA makes differences between GDP and GNP |
| Dependency | This economy is self-reliant and not dependent on other economies | An open economy is dependent on one another in several ways. |
| Theoretical vs realistic | A closed economy is a hypothetical concept | This economy is real and almost all the economies of the world are open |
| Economic sectors | In the closed economy, there are either two or three sectors only | In the case of the open economy, four sectors participated in the economic undertakings |
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