In a closed economy, the government would prohibit trade with other nations.
An economy is where the production and consumption activities of businesses and individuals are interrelated. This domain also determines how resources are used in general.
- A closed economy is where everything stays "within" the particular area.
- In other words, a closed economy is where trading is done within one economy.
- In this form of economic activity, there is no involvement or participation of outside factors or businesses.
- This means that the government of one nation prohibits other nations from its trade.
- It only allows trade within the nation and does not allow outside participation.
An economy where trading is done within itself or one nation and prohibits outside nations from getting involved is known as a closed economy. Thus, the correct answer is the first option.
Learn more about "closed economy" here: