Closed Economy

Empirically, there is a close positive relationship between domestic savings and investment. This is consistent with what we should expect to observe in

• a closed economy

• the Mundell-Flemming model with perfect capital mobility.

• the Mundell-Flemming model with perfect capital mobility and flexible exchange rates.

• the Mundell-Flemming model with perfect capital mobility and fixed exchange rates.

• none of the above.

In a closed economy, which of the following is true about the relationship between savings and investment?

• Savings always equal investment

• Savings are always greater than investment

• Investment is always greater than savings

• There is no relationship between savings and investment

Which of the following is a characteristic of a closed economy?

• It does not engage in international trade

• It has a high level of imports

• It relies heavily on foreign investment

• It has a flexible exchange rate

In a closed economy, the GDP is calculated as the sum of which components?

• Consumption, investment, and government spending

• Consumption, investment, exports, and imports

• Consumption, exports, and government spending

• Investment, imports, and government spending

What is the primary focus of economic policy in a closed economy?

• Maximizing exports

• Balancing trade deficits

• Promoting domestic production and consumption

• Attracting foreign investment

Which of the following is NOT a feature of a closed economy?

• No foreign trade

• Self-sufficiency

• Dependence on global markets

• Focus on domestic resources

In a closed economy, how is the interest rate determined?

• By the global market

• By the balance of savings and investment

• By foreign exchange rates

• By international trade agreements

Which economic model is most applicable to a closed economy?

• IS-LM model

• Mundell-Fleming model

• Heckscher-Ohlin model

• Ricardian model

What is the impact of a closed economy on consumer choice?

• Limited to domestic goods and services

• Unlimited due to global trade

• Enhanced by foreign products

• Dependent on international markets

In a closed economy, which sector is likely to be the largest contributor to GDP?

• Agriculture

• Manufacturing

• Services

• Foreign trade