Open economy

In an open economy is understood in the macro-economy, an economy that is in the world without restrictions in conjunction with other economies. One open is a closed economy, as described in the two-sector model, contrary.

In fact, hardly neither completely open nor closed economies. The model of the open economy is merely the importance of foreign trade ( imports and exports ) in the development and use of national income represent. This also statements about the share of foreign trade in national income of a country are possible. Germany, for example in comparison to other countries, a high ( net ) export share.

Theoretical foundations

In the model of the open economy, the following applies: The aggregate demand is the sum of private consumption, investment, government expenditure and net exports in a given period (usually a calendar year).

With

And

With

= Aggregate demand ( national income uses)

= Aggregate supply ( national income by origin )

= Private Consumption

= Investments

= Government expenditure

= exports

= imports

= Net exports

The measure of an open economy is determined by the share of net exports in national income

• Economics
• Macroeconomics
• Foreign Trade