Let’s have a look at the multiplier of both the economies

The multiplier must be more than or equal to 1/MPC and 1/MPS. 

(Here, MPC means Marginal Propensity to Consume, and MPS means Marginal Propensity to Save.)

MPC should be equal to MPS for this to be true.

In the case of a closed economy:

1/1-MPC multiplier

or (because MPS = 1-MPC):

Multiplier=1/MPS

For an open market economy:

Multiplier= 1/1-MPC+MPM

or (because MPS = 1-MPC)

Multiplier=1/MPS+MPM

In an open economy, the multiplier is less due to the additional leakage factor MPM (Marginal propensity to import).

The components of this Keynesian model of income flow include national income, production, consumption, and factor payments, and they are commonly shown as a circle. Savings, taxes, and imports are examples of non-consumption uses of money that “leak” out of the main flow. This lowers the amount of money accessible to the rest of the economy. As previously discussed in open economies, there is an additional factor called MPM in the open economy that causes leakages by allowing income earned in one country to be transferred to another. The cash used to purchase the imports depart the nearby region, resulting in a domestic outflow. Savings, taxation, and imports are the three sources of leakage in a fully open economy. These are the marginal propensity to save (MPS) plus the excess income going to the government in the form of taxes plus the amount going overseas in the form of imports and expressed by the marginal propensity to import (MPM).

Conclusion:

Since a portion of domestic demand is spent on foreign items, the multiplier in an open economy is lower than in a closed economy. When compared to a closed economy, a rise in autonomous demand leads to a lesser growth in output. The extra money will now be spent on both domestic and imported items. The magnitude of the multiplier is further influenced by the tendency to import in an open economy, as both export and import take place. A smaller multiplier is associated with a strong proclivity to import.

When we discuss economics in-depth, we may split it into two more major categories: Open economy and closed economy. An open economy is one in which product exchange involves not only domestic elements (goods and services) but also entities from other nations. Managerial interchange, technological transfers, and all types of products and services are all examples of trade. It contrasts with a closed economy, which prevents foreign commerce and finance. A closed economy is one in which commodities and services are not exchanged with other nations. It’s indeed self-contained in a closed economy. It means that no imports or exports are allowed into or out of the nation. A closed economy’s objective is to fulfill all of a country’s consumers’ demands within its boundaries.