An economy is a term referring to a certain situation where exchange of goods, services, goods and payments takes place through a marketplace or economic activity. In economics, an economy is a local area of specialization, production, distribution, and interaction of different agents with diverse characteristics and practices. In economic theory, an economy is defined as a socio-economic domain that focus on the practices, discourses, goods and payment arrangements related to the production, utilization and management of physical resources. A wide variety of different economic concepts, theories and models are used in economics, which include concepts like the theory of the market, state of equilibrium, entrepreneurship, micro economic activity and macro economic activity.
The study of economy can also be broadly explained as the process of determining the value of a nation’s output in relation to the demand of the population for that same level of output in the domestic market. The analysis of economic activity takes into account the interdependence of economic institutions, policies, practices, structures and incentives over time and space. A well managed economy facilitates efficient allocation of inputs, technology, resources and revenues. A well managed economy enjoys growth of productive capacity at a steady pace, with high levels of employment and investment, and with the lowest level of inflation. For a country, to flourish economically, government needs to invest in creating infrastructure, promoting economic growth, eliminating poverty, providing educational facilities and healthcare, developing efficient judicial system and boosting growth and employment.
Each economic activity has its own role to play in the overall growth and welfare of a nation. Growth of economy needs adequate funding, flexible capital assets, efficient management of financial resources, skilled and trained human capital, favorable international trading position, proper protection of property rights, promotion of international economic programs, promotion of the market system and enhancement of quality of life. All these contribute to the favorable condition of economy and help it attain the objectives set by the central government. A sound economic system ensures that national income increases proportionately with increased level of economic activity.