In a closed economy, which restriction would the government typically impose?

• A. Ban on domestic production
• B. Restriction on government spending
• C. Limitation of consumer choice within the country
• D. Prohibition of international trade

Answer: (D)

Verified step by step guidance

1. Understand the definition of a closed economy: it is an economy that does not engage in international trade, meaning it neither imports nor exports goods and services.
2. Recognize that in a closed economy, the government typically restricts or prohibits international trade to maintain economic self-sufficiency.
3. Analyze the options given: banning domestic production would contradict the idea of a functioning economy; restricting government spending is a fiscal policy choice unrelated to openness; limiting consumer choice internally is not a defining feature of a closed economy.
4. Identify that the key restriction in a closed economy is the prohibition or absence of international trade, which means no imports or exports are allowed.
5. Conclude that the government typically imposes a prohibition of international trade to maintain the closed economy status.