1.

Explain closed economy and open economy.

Answer»

Theoretically, there are two types of economy namely

  1. Closed economy and
  2. Open economy.

1. Closed economy:

  • The closed economy is the one in which there is no role of foreign trade.
  • Such economy does not undergo economic transactions with other countries.
  • Neither any goods, services and factors of production are exported from such country nor any goods, services and factor of production are imported in such country.
  • Thus, closed economy is self-dependent or self-reliant.

2. Open economy:

  • In open economy, foreign trade plays an important role.
  • Government also plays an important role in such economy.
  • Such an economy has import-export relations with other countries.


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