• A closed economy
This is an economy that is totally self-sufficient and so does not trade with any other economies. This means that they have to be completely self-sufficient because they cannot rely on imports from abroad, or on receiving any income from selling any exports. This is in complete contrast with an open economy, which is quite happy to trade with other economies.
• Disadvantages of a closed economy
It is highly unlikely that one country (or economy) can have all of the raw materials, such as coal, oil and gas that are necessary to sustain life in the same way as those countries that operate an open economy.
A closed economy must also be able to feed itself and so is highly dependent on agricultural and other farming methods to be able to survive. If the country suffers from any adverse conditions such as too much rain or not enough rain, this will have a direct impact on the economy and people may starve.
Countries that operate a closed economy tend to be less developed than those who trade freely because they have so many limitations.
• Who operates a closed economy policy?
Nowadays there are very few nations that operate a closed economy policy. In the past those that did tended to be those with dictatorial political regimes, or those that are underdeveloped in comparison to the western world.
As international modes of transport and increased political exchange have improved, so has the level of open trading. Countries that used to be insular such as Eastern bloc nations are now becoming more involved in world trade.
Other influences have been the majority of Western Europe operating under a single currency, and the development of trade zones in the Americas.
This is an economy that is totally self-sufficient and so does not trade with any other economies. This means that they have to be completely self-sufficient because they cannot rely on imports from abroad, or on receiving any income from selling any exports. This is in complete contrast with an open economy, which is quite happy to trade with other economies.
• Disadvantages of a closed economy
It is highly unlikely that one country (or economy) can have all of the raw materials, such as coal, oil and gas that are necessary to sustain life in the same way as those countries that operate an open economy.
A closed economy must also be able to feed itself and so is highly dependent on agricultural and other farming methods to be able to survive. If the country suffers from any adverse conditions such as too much rain or not enough rain, this will have a direct impact on the economy and people may starve.
Countries that operate a closed economy tend to be less developed than those who trade freely because they have so many limitations.
• Who operates a closed economy policy?
Nowadays there are very few nations that operate a closed economy policy. In the past those that did tended to be those with dictatorial political regimes, or those that are underdeveloped in comparison to the western world.
As international modes of transport and increased political exchange have improved, so has the level of open trading. Countries that used to be insular such as Eastern bloc nations are now becoming more involved in world trade.
Other influences have been the majority of Western Europe operating under a single currency, and the development of trade zones in the Americas.
