In an open economy:

Question

In an open economy:

Quizplus · Accepted Answer

In an open economy, there is trade in goods, services, and/or assets with other countries. This implies that there is a free flow of goods, services, and capital across national borders. The exchange rate is determined by market forces and not by the government. Specialization in activities with a comparative advantage is possible as countries can produce goods or services in which they have a lower opportunity cost and trade them with other countries. Trade is beneficial to both larger and smaller economies as it allows them to access goods and services that may not be available domestically and to exploit their comparative advantages.

In an Open Economy