Closed Economy
Closed economy is an economy, which does not have any sort of economic relation with rest of the world but is confined to itself only. A closed economy does not enter into any one of the following activities.It neither exports goods and services to the foreign countries nor imports goods and services from the foreign countries. It neither buys shares, debentures, bonds etc. from foreign countries nor sells shares, debentures, bonds etc. to foreign countries. It neither borrows from the foreign countries nor lends to the foreign countries. It is therefore obvious that due to all these seasons, Gross Domestic Product and Gross National Product are the same in a closed economy.
Open Economy
An open economy is just the opposite of an closed economy. It is the one, which is not only involved in the process of production within its domestic territory but also can participate in production anywhere in the rest of the world. An open economy involves itself in the activities with other countries such as buying shares, debentures, bonds etc., borrowing and lending from foreign countries. Normal residents of an open economy can move or be employed and are allowed to work in the domestic territory of other economies.
Hence Gross Domestic Product and Gross National Product are not same in an open economy. It is to be noted that at present almost all economies of the world are open economies.