Q. A "closed economy" is an economy in which (UPSC Prelims 2011)
Answer: neither exports nor imports take place
Notes: The correct answer is [D] neither exports nor imports take place.In economic theory, a closed economy is one that is completely self-sufficient and has no financial or trade interactions with the outside world.A closed economy operates in total isolation. Because it does not trade with other nations, its economic activity is limited to its own borders.

• No International Trade: There are no exports (selling goods abroad) and no imports (buying goods from abroad).
• No International Capital Flows: There is no Foreign Direct Investment (FDI), no borrowing from foreign banks, and no international movement of labor.
• Self-Sufficiency: The country must produce everything it consumes—from raw materials to high-tech goods.