closed economy


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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:

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If these two forms of capital are assumed to generate different rates of return, this would amplify the closed economy assumption.
For instance, the investment rate in the open economy in 2007 is twice that in the closed economy.
Therefore, in a closed economy, in the medium term, the economy would return to the initial output level.
The real exchange rate effect has already been addressed by both Zee (1987) and Lin (1994) by extending Diamond's (1965) one-good, closed economy OLG model with internal public debt to include two countries and two goods.
One group of researcher examines the relationship of money demand to a closed economy and another to an open economy framework.
Until 1991, India had a closed economy, with the domestic chemical industry enjoying protection in the form of differential import duties on raw materials and finished chemical products.
24, 1980 decisions that dealt the fatal blow to the single party administration's favorite closed economy.
And as a closed economy, if the North finally ran balanced trade, all trade surplus for the South would have gone as well.
The government is also said to be considering allowing foreign banks into the country's largely closed economy.
While South Korea enjoys a free economy that encourages investment and growth among its citizens, North Korea operates in a closed economy where education is limited to the regime's propaganda.
In Chapter 3, "Fichte's reappraisal of Kant's theory of cosmopolitan right," James demonstrates how Fichte's eventual proposal for a planned and closed economy deviates from Kant's cosmopolitanism.
The state operated a closed economy, and there were many restrictions against foreigners in the market," he said.