IGCSE Economics Paper-2: Specimen Questions with Answers 76 - 76 of 100

Passage

“The private sector, this includes reports such a corporate social responsibility reports, responsibility reports or environmental reports. For the public sector, this includes reports such as sustainability reports/plans, state of environment (SOE) reports, or strategic plans. “

Question 76 (5 of 5 Based on Passage)

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Short Answer▾

Distinguish between closed economy and open economy

Explanation

Closed economy refers to the economy that has no sort of economic relationship with rest of the world but is restricted to it only. A closed economy is restricted and it will not enter any one of the following areas:

  • Shares and debentures: It do not deal in buying and selling of shares, debentures, bonds etc. from any foreign countries.
  • Export and Imports: A closed economy neither export nor import goods nor services to the foreign countries.

  • Borrowing and lending: A closed economy is not involved in borrowing and lending from the foreign countries.

  • Restricted to domestic territory: No resident if a country can go out and no foreigner can enter the domestic territory for work in the closed economy.

On the other hand, an open economy is involved in the production process within the domestic region but also can carry out production anywhere in the rest of the world. Following activities are involved in an open economy:

  • Buying and selling of shares anywhere in the rest of the world.

  • Borrowing and lending from and to foreign countries.

  • An open economy can send gifts and remittances to foreigners and can receive them from the foreign country

  • Residents of the economy can move from one territory to another to work.

Due to the above-mentioned reasons, Gross Domestic Product and Gross National Product are different in both the economies economy.

Closed and Open Economy

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