An economy consists of the resources of people, businesses, and organizations within a country. It also refers to the management of those resources. The word itself comes from the Latin economia, which means “management of resources.” Essentially, it is the sum total of all market transactions within an area. Specifically, it involves the buying, selling and bartering of goods and services within an area. There are three main stages of the economy: growth, peak and recession.
Economic activity is generally highest during the growth stage. This is a time when businesses are busy and sales are up, which means employment is high as well. During this phase inflation is also at its lowest.
Man is naturally economical, and in order to gain more of what he wants, he saves, conserves, and invents all kinds of devices for increasing his supply of goods and services. It is because of this that he is able to make progress in satisfying his wants and to keep himself from wasting what he does not need, or from destroying what he does not want to use, and that progress is what makes it possible to live better than before. This is the essence of economy, as Ludwig von Mises pointed out, and it can be seen in the everyday lives of all people. But the word has been taken by some into figurative uses which do not fit its real meaning. For example, there are people who talk about heating up, cooling down or stimulating the economy, and this does not help to explain what it really is.