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Definition: Economy

The Economic system or an economy comprises of method of production, distribution of trade amongst its members, consumption of services and goods by the members. The businesses, organizations, governments, individuals – all are the economic agents in a given economy. As time has progressed, more sophisticated forms of economies have developed. An economy is an outcome of processes that include the values, education, culture, technological capabilities, innovation, history and social, legal and political system. The largest economy in the world in terms of Gross Domestic Product is the United States of America.

The various types of economies are –

• Market Economy – Capitalism , believes in an invisible benefactor such that a hands off system is most successful

• Mixed Economy – A hybrid of the market and the planned economies

• Planned Economy – Can take form of State Socialism or Communism, it is a “hands on” system.

There are various ways to measure an economy. It can be done on the basis of Consumer spending, Gross domestic product, per capita GDP, interest rates etc. Economies have developed from traditional economies to barter economies followed by the three types mentioned above.



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