Economy encompasses the management of available resources to provide for the needs of a nation. An economy is a network of labor, exchange, and consumption that is driven by increased productivity. Economies are distinguished from one another by regional boundaries and develop distinctly based on government actions, policies, and the labor of individuals.
A country’s economy can be influenced by monetary and fiscal policies of its government body. Monetary policies regulate the money supply and interest rates to manage inflation and influence economic growth. Fiscal policy involves a government body setting taxes and spending to impact economic activity.
The primary measure of a nation’s economic health is its gross domestic product (GDP), which calculates the value of all goods and services produced within a country during a set period, like a year. A growing GDP is a sign of an economy in expansion while a shrinking GDP indicates a recession. Other indicators of an economy include unemployment, which measures the number of people without a job, and inequality, which refers to how evenly wealth is distributed among a nation’s population.
A country’s economy is also measured by its national income, which takes into account all of a country’s foreign and domestic revenue and then divides it by the population to determine per capita income. This figure is used by lenders to determine lending eligibility and to classify economies into four main income groups for analytical purposes: low-income, lower-middle-income, upper-middle-income, and high-income.