Open Economy vs. Closed Economy

1435 Words6 Pages
Open versus closed economy 1. Introduction The omnipresent trend at the international scale is that of globalization and market liberalization. The phenomena are generally understood as the lifting of the territorial boundaries between the states and the liberalization of the circulation of goods, services, people, cultures and so on. In other words, more and more emphasis is being placed on the creation of open economies, which function based on economic principles and lack of governmental interference. They are regulated within the international context and they succeed based on competition. Still, despite the increasing popularity of and pressure towards open economies, most countries remain reticent in the meaning that they only wish to take advantage of the benefits of open markets for themselves, while continuing to regulate the economy in order to minimize the shortages. A conflict is as such created as the countries seek openness, yet they do not fully open themselves. In order to better understand the current situation of the global economies, it is necessary to comparatively assess the concepts of the open and closed economies. Additionally, it is necessary to reveal the potential benefits and shortages of an open economy. 2. Differences between open and closed economy At the most basic level, the open economy is one that engages in relationships with other states, whereas an enclosed economy is one which does not engage in trade relationships
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