Open economy

An open economy^[1] refers to an economy in which both domestic and international entities participate in the trade of goods and services. This type of economy allows for the exchange of products, including technology transfers and managerial expertise. However, certain services, such as a country's railway operations, may not be easily exchanged internationally due to practical limitations.

In contrast, a closed economy restricts international trade and finance with other countries. In an open economy, the sale of goods or services to a foreign country is known as exporting, while the purchase of foreign goods or services is referred to as importing. Collectively, these activities form the basis of international trade.