Closed Economy

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DEFINITION of 'Closed Economy'

An economy in which no activity is conducted with outside economies. A closed economy is self-sufficient, meaning that no imports are brought in and no exports are sent out. The goal is to provide consumers with everything that they need from within the economy's borders.

A closed economy is the opposite of an open economy, in which a country will conduct trade with outside regions.

INVESTOPEDIA EXPLAINS 'Closed Economy'

Closed economies are more likely to be less developed if they lack internal sources of some raw materials, such as oil, gas and coal.

Due to the prevalence of international trade, truly closed economies are rare. Even governments that seek to limit the political or cultural influences of the outside world are likely to trade with other economies on some scale.

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