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OPen and Closed Loop? What does that mean?

MY 83 P-type will drop rpm when i put the jumper in but no check engine light. I know the light is good, I can see it before i start the car up.

My question is> WHat does Open loop and closed loop mean and how can I confirm it is working... Right now my car runs well but I have the timing advanced to about 15-17 degress and there is no knocking or pinging on regular gas. Does this mean I can advance it more ??
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