The Economy is the system of production, distribution and trade of goods and services in an entity such as a nation or small town. It is influenced by natural resources, culture, laws, values, education, technological evolution, history and social organization. In most cases no two economies are alike.
Historically, people leveraged their unique skills and interests in order to make themselves better off. They would then trade the portable representation of their productivity (money) for other goods and services. As a result of this voluntary exchange, the economy evolved.
A more formal definition of economy could be “The careful and frugal use of land, labor, energy, and productive devices in order to get the most possible return for what they produce.” This is the essence of human nature, and it is the basis for the modern world’s economics.
In the case of a nation, its economy is measured mainly by the balance of trade: how much it imports versus how much it exports. This can be a positive or negative number, and is a measure of how open it is to business. How easily can a new drug be introduced, a construction project begun, or a factory built? How easily can prices change to reflect changing conditions?
The economy is also affected by how a nation’s government operates. For example, its fiscal and monetary policies affect inflation and loan costs, which in turn affects the ability of citizens to purchase food, cars, or homes.
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