Question

Describe the three kinds of evidence that economists use to support the assertion

that economies open to the world economy grow faster than economies that are closed.

Answer 1

The three kinds of evidence used by economists to support the assertion that economies open to the world economy grow faster than closed economies

The economists put forward the casual empirical evidence of historical experience,where they divided countries with the same background,which were affected by war and found out that the economies that were closed suffered to a great extent as compared to open economies.

The economist used evidence based on economic models and deductive reasoning to infer that when a country has a larger market in case of an open economy,it provides a greater incentive for it to under take various research and development activities,allowing the inflow of production inputs,foreign capital as well as technology and managerial skill which would lead to overall development of the economy.

By making use of statistical comparison of countries,economists argue that there is a direct relationship between the trade policy and the economic growth of a country and that countries which have open trade policies show faster economic growth as compared to closed economies.