Question

Discuss the topic of open economy. What are the pros and cons?

Answer 1

Today, many countries have an open economy. Companies can sell their goods and services across continents, and most companies prefer to own private property. Much of GDP accounts for imports and exports. As a result, a wide range of products from national and global brands are available to customers. If you're an entrepreneur, a clear understanding of the differences between open and closed economies is critical. This will help you decide with whom and where to invest money for long-term success.

People are free in an open economy to sell goods and services to foreign countries. They also have the option of buying products and doing business worldwide. There is an open economy marked by low trade barriers in the United States, Australia, Singapore, Switzerland and most EU countries.

Collaboration fosters growth. People can trade goods and services in an open economy, start or expand their business across borders, and benefit from lower costs. Customers have access to a wide range of otherwise inaccessible items. The dynamic economic environment guarantees optimum resource allocation and customer independence. This type of economy allows domestic producers to compete, translating into goods of better quality and lower prices. A domestic manufacturer of furniture, for example, will compete with hundreds of local and global brands. The organization will therefore aim to offer better customer experience or superior goods

Entrepreneurship is also strongly encouraged. Those who plan to start a company with foreign companies can openly share information and resources. This allows them to keep costs low and access the latest technologies in order to be able to offer competitively innovative products. In addition, goods that are not widely available on the domestic market can be supplied.

Open economies are far from ideal, given their obvious advantages. We are vulnerable to external threats in the first place. Within one economy, price fluctuations, market crashes, and high rates of unemployment may spread to other economies. For example, a global economic downturn followed the financial crisis that took place in 2008. Millions of people have lost their jobs and their loans and found themselves underwater.

In an open economy, by manipulating workers and importing poor quality goods and raw materials, most companies may try to reduce their costs and maximize profits. In fact, large organisations, establishing monopolies and setting unreasonable rates, may control other markets. The rising number of foreign firms could kill local firms. On the other hand, a large corporation's arrival in a small community could put an end to poverty and increase employment rates.