INTERNATIONALPOLITICALECONOMY

JOSÉ GONZÁLEZ ISLAS

2022

Open economies and

closed in the
Commerce
International

Fatima Lopez
John Charles Martínez
Luisa Villamil
Natalia Placencia
 Index

01 Introduction

02 What is economics?

04 What is a closed economy and

open?

05 How an economy works

open and closed?

07 Examples

09 Applications

11 Conclusion

12 References
 Introduction
One of the most basic models of
macroeconomics is a Keynesian model
implemented by John Maynard Keynes.
It is divided into two markets, the market
of goods and services and the money market.
These are connected through the rate
of interests. We will focus on the
market of goods and services, as it is of
there where the two types of economy diverge
what we will analyze. This research attempts
delimiting the origins of the open economy
and the closed economy. We delve into
investigate what each one is, their benefits and
functions.

The economy has been present with

we from the beginning and it was thanks to
she that we managed to get involved among
actors at national and international level,
in the same way, we have understood many
approaches and functions of societies.

01
 What is economics?

No one spends someone else's money as Thisisthankstothecreationofamarket.

carefully how he spends his. national, different from the port market
No one uses another person's resources cities. Connections are starting to exist
with as much care as he uses his own. among strangers thanks to the
So if you want efficiency and new "policy", that is to say instead of the
effectiveness, if you want knowledge to be headofthehouseholdoutsidetheoneinchargeofthe
used properly, you have to economy, in this innovation the
do it through the means of relationships were directly with the
private property. States.
Milton Friedman

Economics is a science focused on

the study of society. It studies the
scarcity production distribution y
consumption of goods and services of the
people. This science has been present
for centuries, in the beginning
we can say that the economy began
in Ancient Greece five thousand years ago.
It is born from the uncertainty of knowing the
[Link]
end of the 18th century, when the economy became
starts to consider as a science
social. It is classified this way
because it observes the data, creates hypotheses,
follow a process and draw conclusions that
involve human beings.
The birth of political economy was
the step that led the world towards a
advance.
02
 After World War II, the
the world is forced to promote the
cooperation mutual for avoid a
catastrophe as was the war for everyone
those involved. Due to this the
globalization economic it explodes. The
trade in goods and services expands
through the nations. It is so efficient this
change that trade becomes a
productive activity, that is why great
part of the world wanted to be part of this
movement, as their economies
they improved after many joined
in a depression after the war.
Taking the above information into account,
we can delve into the topics of
open economy and closed economy.

03
 What is an open economy and
closed?

An open economy is one that In the case of a closed economy, there

interacts with the other economies of the consume goods and services produced in
world. This commercial activity allows the the country. Therefore, it is not accepted
free exchange of goods, products and
exports, nor imports, that is to say no
services to and from the economies
There is flow outside and inside the borders.
foreignersfromcountriesaroundtheworldandapprovethe

movement of investment funds through

He/She has no contact with the outside because of
from borders. Money flows as investment
so it will not have a trade balance. It has been
among the interactions of countries and it
consume national and foreign goods. difficult what functions the economías
closed in the current world, because no one
The great leap forward was not, however, the country is completely self-sufficient. At the same time

the integration of the opening of an economy this economy can to have a

abroad with the theory of determination active participation within the economy
of the income according to the development of
through government spending or the
multiplier of foreign trade, but the government does not participate in the expenses within
it was the integration of relative prices with
of the economy, has no expenses nor charges
the determination of income. Prices
taxes.
relatives, tariffs and devaluation are
originally address in models of
partial equilibrium, but the connection between the
international monetary economics and the
macroeconomics is established in a way
firm until the work ofAlexander, Harberger and
Laursen-Metzler.” (Dornbusch, 1993, p. 4)

Ultimately, the opening of economies to

exterior, caused many actors to grow and
would be significantly benefited by
the number of consumers who were using
of their products.

04
 How does an economy work?
open and closed?

In short, a closed economy is one that discourages interaction.

with foreign economies, preventing their companies and individuals from doing
trade outside its borders. Compared to the open economy that
drives interaction with foreign economies, serving as a basis for
international trade.

Closed economy

In a closed economy, no exchange with other countries takes place.

Only what is produced internally is consumed.

Countries that operate with this type of economy do not engage in imports or
exports. Everything that is consumed is produced internally in the country.

There are no foreign investments, nor foreign companies because there are none.
activities are other companies outside the same country.

Closed economies hardly exist today, as no

the country is one hundred percent self-sufficient. Although the level of economic openness of
each country can vary.

In a closed economy, external flows are 0. National investment = Savings

national = Private savings +
Gross domestic product = Private consumption + Investment Budget surplus.
internal+publicexpenditure.
The investment is necessarily
This indicates what is consumed by the government and the agents. funded by the resources
private, along with the resources that are allocated to the internos que pueden ser privados
tothepublic.
investment that comes from internal production.

05
 Closed economy

It refers to maintaining an exchange of goods and services with economies.

foreign (maintains trade interactions with other countries that participate
in international trade).
Open economies not only exchange goods and services but also
technology, labor forces and capital.

Public expenditure Foreign investment:

In an open economy, it is sent
Normally, public spending
y/o receives capital from and to the
use products and services of the
exterior.
internal market, for
Foreign investment means
support the local economy.
that capital exits the market
In an external economy
internal.
there may be exceptions in
Alocal company can look for
that foreign prices
foreign investment to grow,
can be significantly
whether to improve its quality,
minors or does not exist a
production and profits.
local production.

Imports Exports

They are the products that a company

buying abroad for Theyarethegoodsorservicesthatare

distribute them and sell them within the produced within the territory
nationalandareconsumedoutsideof
country.
he.
The demand for products and
The greater the volume of
foreign services may exist
larger productions are the
whentheyareofbetterqualitythanthe
profits, if that production is
locales, or when they are cheaper. consume.

06
 Examples

Open and closed economy

Some approaches that it is oriented towards

open economy are:

Foreign investment
Exchange rates
Exports
Imports
Public spending
Domestic investment

This series of examples is just a list of

approaches to the way of development
within the economy.

07
 Examples

Open and closed economy

On the other hand, in the closed economy, it is seen

from a narrower or shorter point of view,
because its mode of execution is no longer valid
beyond the achievable, here a concrete example:

It is built from the ground up on consumption.

private, with its respective internal investment and
public spending, which results in the
GrossDomesticProductofthecountryinquestion.
A private saving merged with a surplus
budgetary, that is to say, that the collected is
higher than the spent and thus, results in a
positive national investment.

08
 Applications
Open economy

The applications of open economy go

aimed at commercial interactions with
exterior, mainly focusing on the purchase and
sale of financial goods or services with the rest
ofcountries.

There is an increase in the sum of possibilities

in the investment topic, giving way to the
technology or development in every aspect of the country,
I managed to positively impact,
There is a wide variety of economic models,
therefore, multiple choices are presented for
consumers, just by the mere act of seeing a
unionbetweenthenationalandtheforeign.

09
 Closed economy
On the side of the closed economy, we apply
more closed interaction methods, I do not
allows the intervention of other economies of the
world, so it is mandatory to consume what
the country generates only.
Your application focuses on the same territory, it
which results in a low pressure of the rest
of economies, only an increase would be observed in
the development of local businesses.
Their investment levels are higher.
restricted due to being unable to reach
resources from outside and somehow it is exploited
that the country generates.

10
 Conclusion
After analyzing open and closed economies, we can
to deduce that an open economy is more effective than the
closed economy, due to the connection that exists between
countries. As this research was growing,
we were able to identify certain factors that could make a
a closed economy can be useful, like encouraging society, the
local consumption, among others. It is evident that a
effort for it to work, but in today's world a country
it cannot be self-sufficient and interaction is necessary
economicrelationswithothercountriestomaintainnationalstability.
It was very interesting to identify the needs of these two.
economiesandcomparethemwitheachother.

11
 References

Contreras,A. V. (2003). Origin of logistics: From the closed economy to

competitiveness. Journal of the Faculty of Economic Sciences:
Research and Reflection, 11(1), 36-48.

Rueda, D. (2021, March 12). Open Economy. [Link].

[Link]

Westreicher, G. (2021, May 26). Economic globalization.

Economipedia. [Link]
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Nanot, R. (2022, June 2). What is international trade? Definition and

history. Internationally.
[Link]

S., J. (2021, September 12). What is the difference between open economy
and closed economy? Economy 3. [Link]
open-closed-economy/

Maximum, J. (2020) Open Economy. Characteristics.

([Link]
In an open economy, both...
web page (foreign service)

Nicole, P. Closed economy. economipedia.

(Closed economy)

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