The economy is the total of all activities related to the production, sale, distribution, exchange, and consumption of limited resources by a group of people living and operating within it.

Frequently Asked Questions
  • What is a command economy?

    In a command economy, a centralized government controls the means of production and it decides the output levels for that production. This type of economy is often associated with communist nations. The advantages of this approach include better equality and lower unemployment, but there is often a lack of efficiency or innovation in those economies.

  • What is a market economy?

    A market economy, or free economy, is directed through the laws of supply and demand to set the prices and quantities for most goods and services. Most developed nations are technically mixed economies because they blend free markets with some government interference such as industrial subsidies, licensing, and price fixing.

  • What does inflation do to an economy?

    Inflation means the rate at which the same goods and services come to cost more. If a person's income doesn't keep up with inflation, it can decrease your purchasing power. It can also lower the value of Treasury bonds. But if some level of inflation is expected, it can drive consumer spending, which drives economic growth.

  • How stocks help the economy

    When the price of a large number of stocks is on the rise, it can lead to higher consumer and business confidence, higher spending on big-ticket items such as cars and houses, and an increase in investors entering the stock market. These factors can all lead to greater economic development of a country.

  • What type of economy does the U.S. have?

    The United States has a mixed economy. It combines elements of a command economy with a market economy. A mixed economy allows for government oversight and regulation to achieve public good while also allowing things like consumer goods and services to be regulated by the laws of supply and demand.

Key Terms
aerial view of hong kong
Market Economy vs. Command Economy: What's the Difference?
The "Wall St" street sign is seen near US flags in front of the New York Stock Exchange (NYSE) on a rainy day on Wall Street in New York City
Is the United States a Market Economy or a Mixed Economy?
What Is the Knowledge Economy?
Strikers at Stop & Shop from Massachusetts AFL-CIO
Labor Union
Blue graphs
Economy Definition
K-Shaped Recovery
Long-Term Impacts of the COVID-19 K-Shaped Recovery
Couple buying a car online
How COVID-19 Changed Consumer Shopping Behavior
Wage Gaps by Race
Two figures, one on high pedestal and one on low
What Is Economic Inequality?
Origins of Black Wall Street
Girls raising hand for teacher in classroom
Social Good Definition
Dollars with stethoscope on them.
What Country Spends the Most on Healthcare?
Cover of book "Black Metropolis"
Black Metropolis: How It Helps Us Understand Urban America Today
Self-Driving Cars Could Change the Auto Industry (GM, F)
New Economy
What Is the American Dream?
Six college students walk on campus. Four are laughing, one looks at her phone, and one has her back to the camera.
How Colleges Make Money
Businesswoman using laptop in conference room
Wage Gaps by Gender
Man holding box containing desk stuff and prominent letter labeled "RESIGNATION"
The Great Resignation
What Is a Centrally Planned Economy?
Group of Unrecognizable Candidates Waiting for a Job Interview
The Cost of Unemployment to the Economy
Understanding Contract Provisions
Power lines against a blue sky with white clouds
What Happens When a Utility Goes Bankrupt?
Aerial View of Container Ship Transporting Goods Sailing Across Ocean Leaving the Port
How Importing and Exporting Impacts the Economy
The Prisoner’s Dilemma in Business and the Economy
Parking lot and storefront of Family Dollar store.
Sluggish Economy
empty european parliament hall
What Exactly Is a Socialist Economy?
Workers in a factory arguing with a manager
Unions: How Do They Help Workers?
Wildfires Threaten Santa Barbara County
How Fire Season Affects the Economy
Juche Tower and Workers' Party monument in Pyongyang, North Korea
Command Economy: Advantages and Disadvantages
Plutocracy Definition
People working from home on a video call
Reimagining the Workplace After the Great Work-From-Home Migration
Official Strike Definition
Black Economy
Black and white UAW picketers marching on strike
The History of Unions in the United States
Scary hallowen pumpkin on wood.
Halloween's Effect on the Economy
Tornado Rolling Through New York, New York, United States
How Tornadoes Impact the Economy
Close up on computer monitor showing financial market chart
Trade Deficit
American Federation of Labor union label, circa 1900
The Top 5 Most Unionized Industries
Senior Businessman Business Meeting Financial Presentation
Kickbacks and Warning Signs They Might Be Happening
What Is a Command Economy?
Young woman smiling and working at home on her laptop
Employability, the Labor Force, and the Economy
Secretariat Building of the United Nations, New York City, New York, USA
United Nations (UN)
A group of union workers on strike is an indication of organized labor practices.
What Is Organized Labor?
The World Bank
World Bank Definition
A large family makes a toast in their kitchen
What Is Economic Security?
Blue charts
When Is Inflation Good for the Economy?
The Role of Commercial Banks in the Economy
How Is Wealth Measured?
Businessman fainted on the floor as the stock market falls badly.
Why Is Deflation Bad for the Economy?
U.S. States by GDP per capita, 2017
Does East or West Rule the U.S Economy?
Overheated Economy Definition
Black man with arms crossed in patient gown while White doctor writes in file
Racial Bias in Medical Care Decision-Making Tools
What Are Some Examples of Free Market Economies?
3 Ways Robots Affect the Economy
A dirty, flooded canal
What Is the Fourth World?
Is Industrialization Good for the Economy?
A picture of a group of skyscrapers
What is the First World?
Cargo Ship and Cargo Plane With Working Crane Bridge in Shipyard at Sunrise
Trade Definition in Finance: Benefits and How It Works
Man with head in his hands
Disguised Unemployment