economy

An economy is the system by which a society organizes the production, distribution, and consumption of goods and services. It encompasses resources such as labor, capital, land, and entrepreneurship, and is shaped by technology, institutions, and incentives. Economies operate under varying rules and norms, from market-based to state-directed, and often blend both through mixed systems.

Economic actors include households, firms, governments, and financial institutions. Markets for labor, capital, and goods coordinate decisions through prices. The economy is commonly divided into sectors such as agriculture, industry, and services, with information and technology increasingly central. Wealth creation depends on productivity, innovation, investment, and efficient allocation of scarce resources.

Economists study microeconomics, which examines individual markets and decision-making, and macroeconomics, which analyzes aggregate outcomes such as gross domestic product, unemployment, inflation, and growth. Policy tools, including monetary policy, fiscal policy, and trade policy, aim to influence economic activity and stability. Global interconnectedness through trade, capital flows, and exchange rates links national economies.

Measurement of an economy relies on indicators like GDP, unemployment rate, and inflation, but no single measure fully captures welfare or sustainability. The informal sector, inequality, environmental impact, and quality of life are also considered. Debates continue over the best balance between efficiency, growth, and equity within different economic systems.