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What Is An Economy?

An economy refers to the aggregate of inter-related production, consumption, and exchange activities that determine how scarce resources are allocated. The production, consumption, and distribution of goods and services are used to fulfill the needs of those living and operating within the economy, which is also referred to as an economic system.

Deeper Definition

A country’s economy is peculiar to that country, but it can be affected mainly by the foreign exchange the country is actively involved in. The production rate must exceed the consumption rate. The United States of America is known for producing goods internally and is also involved in international trade, with an emphasis on exportation over importation.

The distribution of money can also affect the economy. Economists are particular about the demand and responsive supply of the nation’s needs. Different factors can affect the economy of a region among which is inflation. Inflation is a persistent rise in price, and once this happens, a recession can take place. The economy will be greatly affected if a recession takes place, and it will take several years, with adequate planning to restore the economy to where it was or where it is meant to be.

In the US, constituting less than 5 percent of the world’s population, more than 20 percent of the world’s total income is generated. America is the world’s largest national economy and leading global trader. The process of opening world markets and expanding trade, initiated in the United States in 1934 and consistently pursued since the end of the Second World War, has played an essential role in bettering America’s fortunes.

The nation’s economy is fueled by abundant natural resources, well-developed infrastructure, and high productivity. It has the seventh-highest total estimated value of natural resources, valued at about $45 trillion in 2015. Americans have the highest average household and employee income among OECD (Organization for Economic Cooperation and Development) member states.

Types of Economy

Pure Market Economy

Pure Command Economy

Traditional Economy

Mixed Economy

Economy Example

Japan, one of the Asian Tigers, is known to practice the mixed type of economy where the characteristics of both the command and market economies are combined. They run one of the largest economies globally.

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