Economy refers to any physical condition in a society which affects the processes of production, distribution, and use of materials and goods. An economy is a part of the overall production, distribution, and exchange of goods and services, by various producers and consumers, for the benefit of all. In simple terms, it is defined as ‘a political community that relate to each other and influence each other through the production and distribution of goods, services, and information’. The term has different meanings in different fields of study. In economics, however, it refers to the overall interrelations of economic activities of a country, as reflected in its output and consumption; prices and incomes; and incentives for investment and employment.
Economists try to understand the nature and effects of the economy, taking into account the inter-linkages among economic factors. Households, businesses, governments, and even individuals are economically connected through their purchases and transactions. Households, businesses, governments, and even individuals affect the overall economic performance of the economy through household management, money management, spending and savings habits, investment, employment, technology use and knowledge, international trade and finance, innovations, entrepreneurship, international capital movement, and market structure. All these factors, affecting the economy, contribute to the movement of economy towards or away from the state of equilibrium.
Economists attempt to identify the sources and directions of changes in the economy, taking into account the inter-relations of economic agents within the economy. They are also responsible for the formulation of policy, in order to promote economic growth, stabilize the financial system, decrease inflation, reduce domestic price level fluctuations, reduce the role of foreign direct investment in the economy, increase domestic output, and increase domestic capacity and efficiency. The role of economists in our lives can seem quite complicated and overwhelming, but it does not need to be so. The best thing to do is to remember what they say: ” Economics is always economics.” The knowledge of how a business operates in and out of the economy is necessary if one is to understand how to maximize the firm’s resources and profit at the maximum level. Understanding economic concepts, principles, the nature of markets and money are essential in order to understand how to develop economic growth, and how to keep economies growing.