How will you differentiate an open economy from a closed economy? Explain with the help of an example.
An open economy is one in which product commerce involves not only domestic elements but also entities from other nations (goods and services). Managerial interchange, technological transfers, and all types of commodities and services are all examples of trade. (However, there are some exclusions that cannot be swapped; for example, a country's railway services cannot be traded with another country to use the service.)
A closed economy is one that is entirely self-sufficient and does not rely on foreign trade for imports or exports.
Closed economies are inefficient because they require raw resources produced elsewhere that are critical as inputs to finished commodities.
Through the use of quotas, subsidies, and tariffs, a government may isolate a single industry from worldwide competition.
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- Does it matter that increased government debt/GDP ratios place a higher tax burden on future generations? How important is the composition of government spending in your argument?
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