Scroll Top


    Closed Economy

    What is a Closed Economy?

    A closed economy is one that does not swap their trading with outside economies. The closed economy is independent, meaning no imports enter the country and no exports leave the country. The aim of a closed economy is to provide all that domestic consumers need from within the boundaries of the country.

    Why Close Off an Economy?

    A wholly open economy risks becoming overly dependent on imports. Domestic producers can also suffer as they can't compete at low international prices. Governments, therefore, use controls, such as tariffs, subsidies, and quotas to support domestic enterprises.

    Despite the uniqueness of closed economies, a government may close off a particular industry from international competition. Some oil-producing countries have a history of banning foreign oil companies from doing business inside their borders.

    Why are there No Real Economies?

    It is impossible in modern society to sustain a closed economy because raw materials, such as crude oil, play a vital role as inputs to the final products. Most countries obviously do not have raw materials and are forced to import those commodities.

    Closed economies are unintuitive to new, liberal economic theory, encouraging the opening up of domestic markets to international markets to draw on competitive advantages and trade. Enterprises and individuals can increase their wealth by specialising in labour and allocating resources to their most productive, efficient operations.

    Modern globalisation means economies continue to become more open to benefit from international trade. A good example of an internationally traded raw material is petroleum.

    Real Example of Closed Economies

    There are no economies which are completely closed. Brazil imports the least amount of goods in the world when measured as a portion of the gross domestic product (GDP) and is the most closed economy in the world.

    Brazilian companies face competitive challenges, including appreciation of the exchange rates and defensive trade policies. In Brazil, only the biggest and most productive companies with substantial economies of scale can conquer export barriers.


    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use


    ISO 27001

    Data Center


    SSL Certified Site

    128-bit encryption