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Econ: What is an Open v. Closed Economy? 2 Views
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Description:
What is an Open v. Closed Economy? An open economy is one that engages in trade with other economies. Conversely, a closed economy is one that is vertically integrated and self sufficient to the point where no trade with other economies is required or desired. Due to the needs of modern societies for energy, food commodities, and other resources that may not be available internally, there are no technically closed economies among nations in the 21st century.
Transcript
- 00:00
And finance Allah shmoop What is an open versus a
- 00:05
closed economy Well to answer the question let's take a
- 00:10
little trip This is the Isle of Four Sick and
- 00:12
Seclusion It's way out in the ocean far from any
- 00:15
other country and not along any particular trade route No
Full Transcript
- 00:18
ships ever come by No planes ever land The natives
- 00:22
subsist mostly on homegrown coconuts and specially farmed Algy Well
- 00:26
they've never seen a Marvel movie Sadly not even Ultron
- 00:30
They have never tasted Dairy Queen and it's a very
- 00:32
lonely very sad highland There's no trade it all with
- 00:35
the outside world no exports no imports to say it
- 00:37
another way It's a closed economy Alright moving elsewhere in
- 00:41
the world we come to the United States of America
- 00:43
It's the centre of global commerce the global economic network
- 00:48
It trades with other countries all the time Imports and
- 00:51
exports are well both Hi It's an open economy Well
- 00:54
don't think of opening closed Economy is like a light
- 00:56
switch right Like lights off completely closed lights on completely
- 01:00
open Instead the ideas have opened and closed Described a
- 01:03
continuum more closed versus Mohr Open every country fall somewhere
- 01:08
on that spectrum The U S is relatively open but
- 01:11
there are closed aspects of our economy We put tariffs
- 01:15
on certain products We have import restrictions We have rules
- 01:18
about exporting things like high end military technology or data
- 01:22
about our high school students looking atyou Their Facebook international
- 01:26
banking rules also make friction an important export of capital
- 01:30
Well meanwhile even the most closed economies in the real
- 01:33
world don't get all the way to the Isle of
- 01:35
Forsaken seclusion situation Even economies that are considered relatively close
- 01:40
like say North Korea they're not completely closed They have
- 01:44
some trade They might import weapons from China for instance
- 01:47
or export tweeted threats to South Korea You could argue
- 01:51
that Earth as a whole is a closed economy After
- 01:54
all We have yet to set up any trade routes
- 01:56
with Martians at least not yet Keep watching the skies
- 01:58
though People work trying But even the idea of the
- 02:01
Earth as a closed economy has some holes in it
- 02:03
Things like the gold and uranium we mind were probably
- 02:06
deposited by meaty yours Meanwhile we import energy and light
- 02:10
from the sun and we export radio signals An old
- 02:13
space junk somewhere in the cosmos there might be a
- 02:16
giant space crab using a Voyager probe as its shell
- 02:19
And it's probably only a matter of time before we
- 02:21
start receiving signals from some space monster version of Netflix
- 02:25
emanating from the Vega system You know way out there
- 02:27
Can't wait to see how their reboot of House of
- 02:29
cards turns out to Some closed economies are ones that
- 02:32
lack outside foreign trade They can become self sufficient But
- 02:35
it can also mean significant scarcity If the forlorn islanders
- 02:39
suffer a bad algae harvest well they can't just import
- 02:42
food Suddenly from another country It can lead to rationing
- 02:45
or a mass starvation Open economies include a lot of
- 02:48
foreign trade high levels of imports high levels of exports
- 02:51
In the real world no economy is ever completely open
- 02:54
or completely closed And outside of the Isle of Forsaken
- 02:57
seclusion it's hard for an economy to be completely closed
- 03:00
ever Instead everything falls on the spectrum somewhere between more
- 03:03
open and more clothes Economies like North Korea are skewed
- 03:06
toward the close side Economies like the U S Air
- 03:08
skewed toward the open side And as for those forsaken
- 03:11
islanders Well give them a little time the global markets
- 03:14
bound to find him Eventually they'll be selling their algae
- 03:16
products to hipster vegans through Amazon and delivering high protein
- 03:20
forsaken coconuts via drone having crew prepare for take off
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