Open Economy

Open Economy – Open economy is a type of economy that deals with foreign nations for trade. The economic and trade activities between are carried out smoothly nationally and internationally.

Whatever goods and services are produced domestically, a part of them is exported to foreign countries and similarly, foreign produced goods are allowed in the country. This exchange is called export and import in simple words. In an open economy, citizens enjoy a wider choice for purchasing goods and services and also have a choice to make monetary investments across the border.

The economic model of an open economy showcases some of the produce being domestically traded and another part of it exported abroad.

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Further, in an open economy, the expenditure does not necessarily equal the amount of production of goods and services. The spending can be more if the country chooses to borrow from abroad or it can also spend less and lend the difference to a foreign nation.

Edited and Updated 08th March 2014

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