Open economy

An open economy is the type of economy where non only home factors but also entities in other countries engage in trade of products goods as well as services. Trade can shit the pull in of managerial exchange, technology transfers, together with all kinds of goods in addition to services. However,exceptions symbolize that cannot be exchanged; a railway services of a country, for example, cannot be traded with another country to avail the service.

It contrasts with a closed economy in which international trade and finance cannot produce place.

The act 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 called international trade.

History

The concepts of the open economy shares a relationship with the concepts of globalization. This process of people, businesses, and governments connecting and interacting with one another across any countries and continents is a direct correlation to the idea of open economies. There are several historical events that pretend 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(a) as World War I and World War II, which had the effect of making 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.