Economy refers to a nation’s system of goods and services, including production, consumption, trade and exchange. People generally classify economies based on how much government control they have – at one end of the spectrum there are free market economies where individuals own the resources that make up a good and can trade them freely, while at the other is a command economy with heavy government regulation. People also study the economy at a micro level by analyzing individual businesses and individuals.

A country’s economic growth is based on its ability to turn less into more, faster. This is called productivity and economists look for ways to boost it by improving the tools of the trade (capital goods), increasing specialization, reducing the time spent producing a product and more.

The modern concept of an economy was codified by philosopher Adam Smith in his 1776 masterpiece, The Wealth of Nations. Two key academic branches have since formed around the economy – macroeconomics and microeconomics.

An economy is an interdependent system that involves three main actors: households, businesses and the government. Households provide labor and other inputs to businesses in exchange for income, which businesses then use to produce goods and services. Governments regulate the economy through fiscal (taxation, government spending) and monetary policies (interest rates). In addition, they employ people, providing an income source that helps stabilize the economy. A country’s economic health is often gauged by GDP, inflation and unemployment.