When a closed economy is open to the foreign sector, it is called an open economy.

The components that are used to compute the equilibrium in an open economy are as follows.

• Consumption (C)
•  Savings (S)
• Investment (I)
• Government purchases (G)
• Transfers (Tr)
• Autonomous taxes (T)
• Imports (M)
• Exports (X)

Equilibrium in an open economy can be explained through two approaches.

• Income and expenditure approach
• Withdrawals and Injections approach

• According to the income and expenditure method, equilibrium in open economy can be calculated as follows. Y = C+I+G+ (X-M)
• Equilibrium in an open economy also can be calculated using the withdrawals and Injections method.
  Withdrawals= S+T+M
  Injections = I+G+X
  W = J
  S+T+M = I+G+X
• Savings (S), autonomous taxes (T) and Imports (M) are considered as withdrawals.
• Investment (I) Government purchases (G) and Exports ( X) are considered as
  injections.
• Equilibrium in an open economy can be presented with a statistical table and
  graphically.