open and close system
A closed system in macroeconomics is defined as, “an isolated system that has no interaction with its external environment. Closed systems with outputs are knowable only thorough Their outputs which are not dependent on the system being a closed or open
System. “(businessdirectory.com)
In a closed system business exist when the only money exchanged is within the domestic circle. No domestic business or products come into play, money stays within the system. There are no leaks of foreign players in this system.
An example of this would be a consumer at a farmers market. They have money earned that they want to use to purchase a product that is produced on the local farm. The local farm has land here in the United States and he purchases his seeds and fertilizer from American companies. The funds all stay here no foreign or domestic trades are involved in the production of the product. Another example would be a flag company here in the United States that produces state flags. They use local employees, purchase the material from local businesses and have only store fronts in the United States. Again no leaks. But it’s still not a perfect system. It limits growth. You cannot grow without looking at all options. To become a bigger player in the business you will need to explore all options to maintain your product and growth. This might mean looking into different options of labor, product, and location. This can make a closed circle have leaks.
An open system in macroeconomics is defined as an economic system with no barriers to free market activity. An open market is characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization and any other regulations or practices that interfere with the natural functioning of the free market. There may be competitive barriers to entry, but there are no regulatory barriers to entry. (investopida.com) those companies can either make the products or in turn
System. “(businessdirectory.com)
In a closed system business exist when the only money exchanged is within the domestic circle. No domestic business or products come into play, money stays within the system. There are no leaks of foreign players in this system.
An example of this would be a consumer at a farmers market. They have money earned that they want to use to purchase a product that is produced on the local farm. The local farm has land here in the United States and he purchases his seeds and fertilizer from American companies. The funds all stay here no foreign or domestic trades are involved in the production of the product. Another example would be a flag company here in the United States that produces state flags. They use local employees, purchase the material from local businesses and have only store fronts in the United States. Again no leaks. But it’s still not a perfect system. It limits growth. You cannot grow without looking at all options. To become a bigger player in the business you will need to explore all options to maintain your product and growth. This might mean looking into different options of labor, product, and location. This can make a closed circle have leaks.
An open system in macroeconomics is defined as an economic system with no barriers to free market activity. An open market is characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization and any other regulations or practices that interfere with the natural functioning of the free market. There may be competitive barriers to entry, but there are no regulatory barriers to entry. (investopida.com) those companies can either make the products or in turn
References: http://www.businessdictionary.com/definition/closed-system.html#ixzz2eFvoLZJ2 http://www.investopedia.com/terms/o/open-market.asp