Economy is the careful and frugal use of land, labor and capital (resources, energy, ingenuity, and productive devices) so as to realize the greatest return of goods and services. It is the foundation of human society and civilization.
Economic activity occurs in the private sector and government sector. It may be focused on local, regional or global levels. It is governed by laws and policies that vary from place to place. For example, the economy of North Korea is very different from that of South Korea, despite sharing similar heritage, people and resources. The difference lies largely in the way government acts to shape and manage the economy.
Governments may act through fiscal and monetary policy to influence the economy. For example, they may manipulate the supply of money or interest rates to encourage growth. They may also spend money they have collected as taxes to stimulate the economy.
The economy is a complex system that affects every aspect of life, from the smallest purchases at your grocery store to the most substantial policies formulated at the international level. Understanding how the economy works is essential to comprehending societal operations, world finances and the dynamics between countries.
The most common metric used to measure a country’s economy is gross domestic product (GDP). GDP measures the market value of all final goods and services produced within the nation in a given period of time. It is a standard gauge of the health of the economy and can be used to identify trends over time.