The term economy refers to the general interaction of human agents. It is a place of exchange where commodities are produced or services are bought and sold. In simple terms, an economy is a place of collective production, consumption and exchange, and the interactions of different agents with each other. In broad terms, it is defined as a political community or realm that emphasize the cultural practices, discourses, and political material manifestations related to the production, usage, and control of resources.
The scope and objects of economy are diverse, but the study of economics is often grouped into two main subtopics: political economy and economic economics. The study of economics is associated mainly with macro-monetary systems such as those found in the United States, England, France, Germany, Japan, and the nations of South East Asia. But it also covers non-monetary systems like the culture, beliefs, traditions and practices of a society. These economic concepts are essential to the understanding of how the economy produces and enables goods and services to be bought and sold. While this is true, most of what people think about economics actually pertains only to the political economy of a nation.
Political economy studies how politics shapes the economy. This includes government structure and the legitimacy of its rule. This also includes the institution of markets, property, money, tariffs, and regulations affecting the economy. Economic sociology studies the institutional conditions that shape the production and distribution of goods and services, particularly in relation to the structure of production and distribution of wealth, which in turn influences prices, quality, quantity, location, availability, accessibility, and choices.
Economic macroeconomics compares the macroeconomic policies undertaken at the national level with those of the economy at the level of micro-economics. It studies the inter-linkages between policies and economic growth. The study of macroeconomics traces its roots to the Theory of Exchange Rates.
Microeconomics studies the movement of economic agents within the economy. Economic activity takes place within the market, between markets, in the environment or within the firm. Micro-economic factors include the prices of goods and services, the productivity of labor and capital, the distribution of income and wealth, and the behavior of both firms and individuals.
The study of economics is multidimensional. It starts with the analysis of the nature and structure of money, credit, loans, production, sales, distribution, technology, education, and activities of production and consumption. Then there is the study of production elasticity of demand, cost of production and potential growth, employment, price changes, and balance of payments. There are also other important areas such as investment, taxes, and public infrastructure. These are analyzed by modern economists in the context of economic development.
Economics makes use of economic theory. The theories of theory are of various different levels. Some are of micro-level, which studies the behavior of economic agents on a micro level, such as the price level of a product. Other theories are at the macro level, which tries to explain how economic activity reaches its ends, for example in the level of production and employment. At the micro-level, price level, production, employment, distribution, technology, education, and consumption all play a role.
There are three main economic theories. These are monetarily based, land based, and time-based theories. Monetarily based theories are those that look into the effect of interest, demand, investment, trade and the structure of money on the level of overall economic activity. On the other hand, land-based and time-based theories look into the effect of these three factors on the level of overall economic activity.