What Restriction Would the Government Impose in a Closed Economy?

What Restriction Would the Government Impose in a Closed Economy?

A. The government would prohibit trade with other nations.

B. The government would set the prices for imported goods.

C. The government would preserve traditional customs only.

D. The government would prevent private ownership of property.

Ans. A. The government would prohibit trade with other nations.

In a closed economy, the government closes off all foreign trade. That is, there are no foreign imports or exports of goods and services, and no finance crosses borders. The economy is on its own, with all goods and services being made and consumed at home. All economic activity, production, consumption, and investment, is contained within the home market. This contrasts with an open economy, where a nation has international trade and finance flows. Other choices, such as the fixing of prices of foreign imports or the prohibition of private ownership, are not the defining characteristics of a closed economy.