closed economy
an economy that is not influenced by any form of INTERNATIONAL TRADE, that is, there are no EXPORTS or IMPORTS of any kind. By concentrating on a closed economy, it is possible to simplify the CIRCULAR FLOW OF NATIONAL INCOME MODEL and focus upon income and expenditure within an economy. In terms of the circular flow, AGGREGATE DEMAND in a closed economy is represented by:
By contrast, the OPEN ECONOMY allows for the influence of imports and exports and here aggregate demand is represented in the circular flow as:
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005