Open Economy， Closed Economy

Autarky is a state in which a country does not trade with other countries. This means that all goods and services are produced and consumed domestically.

The price of a good or service in such an economy is called its autarkic price.

An autarkic economy is also known as a closed economy because it does not trade with other countries.

An open economy, in contrast, is an economy that trades with other countries.

If there are no restrictions on trade, then members of an open economy can buy and sell goods and services at the price prevailing in the world market, the world price.

Free trade occurs when there are no government restrictions on a country’s ability to trade.

Under free trade, global aggregate demand and supply determine the equilibrium quantity and price of imports and exports.

Government policies that impose restrictions on trade, such as tariffs and quotas, are known as trade protection and prevent market forces (demand and supply) from determining the equilibrium price and quantity for imports and exports.