A "closed economy" is defined as an economic system that does not engage in international trade, meaning that it neither exports goods and services nor imports them from other countries. This concept emphasizes self-sufficiency, whereby all production and consumption occur within the economy’s borders, allowing for the analysis of economic dynamics without external influences. In the context of the UPSC Prelims GS Paper I, understanding closed economies is crucial for comprehending broader economic theories, trade policies, and their implications for national economic growth and stability.