Economy and its Types

Economy and its Types The term economy has been defined by A. J. Brown as, “A system by which people earn their living.” J. R. Hicks defined it as, “An economy is a cooperation of producers and workers to make goods and services that satisfy the wants of the consumers.” In short, an economy is referred to any system or area where economic activities are carried out. Each economy has its own character. Accordingly, the functions or activities also vary. The functioning of an economy by its activities is explained in flow chart . by constructing various price index numbers such as Wholesale Price Index, Consumer Price Index, etc, are needed.   Business Cycle: Almost all economies face the problem of business fluctuations and business cycle. The cyclical movements (boom, recession, depression and recovery) in the economy need to be carefully studied based on aggregate economic variables.   Poverty and Unemployment: The major problems of most resource - rich nations are poverty and unemployment. This is one of the economic paradoxes. A clear understanding about the magnitude of poverty and unemployment facilitates allocation of resources and initiating corrective measures.   Economic Growth: The growth and development of an economy and the factors determining them could be understood only through macro analysis.   Economic Policies: Macro Economics is significant for evolving suitable economic policies. Economic policies are necessary to solve the basic problems, to overcome the obstacles and to achieve growth.