An economy is a place of relative comparative analysis, the arrangement of resources to achieve the economic objective. In economic theory, the term economy refers to the relations between economic units as distinguished by differences in their prices, output, employment, income, investment, technology, politics, geographical location, etc. An economy is also an environment in which agents make use of economic decisions, planning and resources to secure their position in society, the family, the community or the nation. In broad terms, an economy is a political and social web in which the major economic activities of the individuals take place. The process of economic growth is referred to as economic growth.

In a market economy, prices rise and fall in response to demand and supply. In an economy based on the principles of classical economics, inflation is deemed to be a harmful phenomenon. In an inflation economy, increases in the general level of living are accompanied by rises in prices of selected items of necessity and luxury. Inflation causes a tendency to widen the gap between rich and poor. Inflation is characterized by the rise in the level of general price level, which in turn is transmitted to other aspects of an economy. For instance, in an economy where industrial growth is high, rising oil and other prices may lead to widening the gap between the rich and poor.

Unlike classical theory, modern economic models treat the economy as a system of interacting autonomous economic agents with divergent potentialities. These agents, guided by market expectations, attempt to coordinate their actions so as to maximize the level of satisfaction of the demands of their customers. It is in this light that state structure is related to the level of economic welfare of the country. The existence and the operation of a market economy depend largely on the existence and functioning of markets. The United States of America is one of the most successful and prosperous countries in the modern world.