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What does "economy" mean?

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There are two main definitions of the word "economy." The primary definition is: a network of producers, distributors, and consumers of goods and services. The second definition is: careful management of available resources. Let's take a look at these in more detail.

The first definition is what we mean by "the economy." When we talk about "the economy," we are referring to a geographic area with physical boundaries: a nation (the American economy), or a region (the European economy). We can even talk about entire planet as a unit (e.g., the global economy). The economy includes the entire set of interrelated networks and relationships that facilitate the exchange of goods and services. It includes all producers and consumers, as well as all persons or organizations that facilitate transfer of goods from producer to consumer. Everyone is part of the economy; we all produce, distribute, and consume things on a daily basis.

In a more general sense, "the economy" can also mean the total wealth of a particular region. Thus, we can ask the phrase "What is the U.S. economy worth (in dollars)?" GDP (gross domestic product) is a quantitative measure of an economy's monetary worth. Such measures, while widely used and accepted, are subject to criticism. There is significant debate in both politics and economics as to how these numbers should be used.

The second meaning of the word "economy" is: careful management of available resources. It implies the skillful use of resources toward maximum effect. A person who budgets well with little money has frugal economy. A poet who uses sparse language vibrantly has great economy of language. This use of the word "economy" signifies working with limits or constraints by being creative, resourceful, or wise. 

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