Answer to Question #74682 in Macroeconomics for trust

Question

explain the significance of inflation and stock market indices to open economy as compared to a closed economy

Answer 1

Stock market indices are not extremely important for the closed economies, since they are not able to attract internationl capital inflows. Open economy is able to attract foreign capital from abroad, demonstrating positive dynamics of stock indices. Inflation in a closed economy is more dangerous, since it is impossible to compensative negative impact of internal inflation via international capital compensation