Economy

Business, Legal & Accounting Glossary

Definition: Economy



Full Definition of Economy


The economy is defined as the sum of all consumption and production activities and their inter-relationships. We normally talk about an economy in terms of one geographic region, most often a country such as the United States, but also at a city level (the New York economy), a state or province-level (the Illinois economy), or at a supra-national level, such as the economy of the European Union or the global economy. By understanding the interplay of consumption and production we can understand how resources are being shared, what the effects of supply and demand are, and how a government might improve the overall economy with the regulation or other stage-setting activities.

As per definition, an economy comprises of every function and activity that is related to generation and use of services and goods in a particular geographical area. Economy and various aspects and activities related to it have given rise to a major educational discipline known as economics.

Business Cycle

The business cycle comprises of inconsistent economic activities that keep recurring in a particular economy for a significant period of time. There are five major stages in a business cycle – growth, trough, peak, recovery and recession. Irregularities in business cycles have increased over time.

Capitalism

Capitalism is a form of economy that is premised on free markets. There are other bases of capitalism like open competition, private ownership of tools of production and profit motives. Business and investment at a private level thrive in a capitalist economy.

Inflation

In economics, inflation is the rate of increase in prices of goods and services at a general level. Inflation also implies that the purchasing capabilities of people living in an economy are declining. This means that the amount of goods and services available for every unit of a currency becomes lesser. An inflation rate between 2 to 3% is supposed to be desirable.

Hyperinflation

Hyperinflation is accelerated inflation. It is generally defined as inflation at more than 50% per month. Hyperinflation can be seen in the Zimbabwean economy.

Economics

Economics is an academic discipline that is used to look at various ways in which entities like individuals, business establishments, governmental organizations and bodies and countries manage the allocation of their limited resources to appease their unlimited demands.

Keynesian Economics

Keynesian economics is a prominent economic theory. It states that a good way to make sure that there is stability and growth in an economy is for a government to actively intervene in economic affairs. Proponents of Keynesian economic theories opine that government is responsible for ironing out irregularities in a business cycle.


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Definition Sources


Definitions for Economy are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 29th March, 2020 | 5 Views.