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Econ Videos 79 videos

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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.

Language:
English Language

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

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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