Differences between an open economy and a closed economy

Reference no: EM13746649

Describe the differences between an open economy and a closed economy.

Describe the process as to how GDP can increase once a closed economy opens up to the rest of the world. How does this opening up of the closed economy affect domestic prices and economic welfare?

Suppose that the world is divided into two sovereign countries, Country 1 and Country 2. There are two commodities in the world: cloth and food. Each country has a fixed endowment 150 units of labor and each can produce both the commodities but they differ in terms of their prevailing technologies. Country 1 can make a unit of cloth using 2 units of labor and a unit of food by using 1 unit of labor. Country 2 can make a unit of food using 2 units of labor and a unit of cloth by using 1 unit of labor. Draw the production possibility frontier of country 1. Draw the production possibility frontier of country 2. Draw their joint production possibility frontier. What should each country produce if they are allowed to trade with one another? What do you think should be the exchange rate between food and cloth in an open economy situation? (Limit: 2 pages; Ideally, between 1 - 1.5 pages)

Refer to the National Public Radio story referred above. Suppose, Africa is thinking to go from open economy to closed economy to stop US and European Union from flooding its market with subsidized agricultural products.

Imagine that you are hired as a policy consultant to reflect on that proposed policy. What should be your recommendation and why?

Reference no: EM13746649

Questions Cloud

Employers should be able to replace permanent workers : Explain why. Please just write this as a disscussion question. It just needs to simply be your opinion if employers should be able to replace during a strike.

Wall street journal project instructions : Required to read and analyze 5 recent articles from the Wall Street Journal, each covering a different topic addressed in the course. You will then write a 1-page review of each article.

How can personal selling costs be controlled : How can personal selling costs be controlled and Why do companies with new brands that have a small market share tend to spend proportionately more for advertising and sales promotions compared to those with a large market share for existing produc..

Differences between an open economy and a closed economy : Describe the process as to how GDP can increase once a closed economy opens up to the rest of the world. How does this opening up of the closed economy affect domestic prices and economic welfare?

Create powerpoint of achievement of civil rights in society : create a PowerPoint presentation of progress (or lack of progress, if you wish) made toward the achievement of civil rights of these and other groups in society.

Pedagogical objectives of a simulation game in marketing : Reflections of Simulation Game Starting-Your company's simulation game objectives/goals(silver tech)

The camels rating system : The Glass-Steagall Act was passed into law - the CAMELS rating system, the letter C stands

Who are the relevant market and nonmarket stakeholders : Case: A Brawl in Mickey's Backyard, Who are the relevant market and nonmarket stakeholders in this situation

User Account

All Pages