Small open economy

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A small open economy is an economy that participates in international trade, but is small enough compared to its trading partners that its policies do not alter world prices, interest rates, or incomes. Thus the countries with small open economies are price takers. This is unlike a large open economy, the actions of which do effect world prices and income.

For example; if the U.S. economy is in recession then the world economy is likely to suffer. On the other hand, a recession in a small open economy like Norway will likely not impact the world economy to a great extent.

[edit] External Links

• International Economics Glossary