Open economy
In today's article we are going to explore the exciting world of Open economy, a topic that has captured the attention of millions of people around the world. From its origins to its relevance today, Open economy has generated debate, interest and curiosity in various areas of society. Throughout this article, we will analyze the importance of Open economy in the current context, as well as its influence on different aspects of daily life. In addition, we will delve into its historical, cultural and social implications, offering a detailed perspective that will allow us to better understand the relevance of Open economy in today's world.
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Major types
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An open economy is a type of economy where not only the domestic factors but also entities in other countries engage in trade of products (goods and services). Trade can take the form of managerial exchange, technology transfers, and all other kinds of goods and services. Certain exceptions exist that cannot be exchanged; for example – the railway services of a country cannot be traded with another country to avail the service.
It contrasts with a closed economy in which international trade and finance cannot take place. The practice of selling goods or services to a foreign country is called exporting. The act of buying goods or services from a foreign country is called importing. Exporting and importing are collectively given the name – international trade.
Advantages and disadvantages
There are a number of economic advantages for citizens of a country with an open economy. A primary advantage is that the citizen consumers have a much larger variety of goods and services to choose from. Additionally, consumers have an opportunity to invest their savings outside the country. There are also economic disadvantages of an open economy. Open economies are interdependent on others and this exposes them to certain unavoidable risks.
History
The idea of the open economy shares a relationship with the idea of globalization. This process of people, businesses, and governments connecting and interacting with one another across all countries and continents is a direct correlation to the idea of open economies. There are several historical events that have affected these ideologies simultaneously. For example, the Silk Road, which connected Eastern Asia with the Middle East and Europe. Another example would be global wars such as World War I and World War II, which had the effect of creating alliances and partnerships between countries, tying them economically to one another.
Open economies are influenced by political views as well. Economic openness, as a political economic concept began in the 19th century and was characterized two schools of thought. Opponents of open economies believe that it could weaken national economies due to its competitive nature, while proponents of open economies believe that economic openness would positively impact trade and stimulate job growth and economic opportunities.
Conclusion
If a country has an open economy, that country's spending in any given year need not equal its output of goods and services. A country can spend more money than it produces by borrowing from abroad, or it can spend less than it produces and lend the difference to foreigners. As of 2014 there is no such thing as a complete closed economy.
See also
References
- ^ Dornbusch, Rudiger (2005). Macroeconomics. pp. 87–145.
- ^ Dornbusch, Rudiger (1984). "The Open Economy: Implications for Monetary and Fiscal Policy". National Bureau of Economic Research. Working Paper No. 1422 – via JSTOR.
- ^ Rodseth, Asbjorn (2000). Open Economy Macroeconomics. Cambridge University Press. ISBN 9780521788748.
- ^ "economic openness | political economy | Britannica". www.britannica.com. Retrieved 2021-12-10.
- ^ Cooper, Richard. "The United States as an open economy" (PDF).
- ^ Mankiw, N. Gregory (2007). Macroeconomics. New York: Worth. ISBN 978-0-7167-6213-3.[page needed]