How Does The Economy Work?


Like the weather, the economy also changes either better or for worse. Universities and colleges around the world are teaching the students about how the economy works. Among these students, some will be future politicians and they will contribute towards their respective country’s economic growth.

The economy is the most interesting field to study. There is no shortage of excitement when it comes to the economy. The concept of the economy will exist until human civilization lasts. The economy started even before people started using money. The economy will be there even when people stop using money completely and use only credit cards to pay.

Different types of economy and how they work  

The economy works in many ways. Economists tried to explain economic growth from the start of human history. They tried to simplify one of the most complex parts of human civilization. However, how does economy work still remain one of the most complex subjects for people who never studied economy in their lives? Every citizen contributes to the country’s economy, but they are unaware of it. The rich citizens contribute a lot towards the economy by paying more taxes or creating more demands for productivity but poor people also contribute and their contribution is no small matter either.

Economy according to many intellectual minds is a machine and many common factors are parts of that machine. These small parts decide how good the machine will work.

One of the most important parts of the economic machine is a transaction. Money does not stay in one place. Money travels places by transaction. Buying goods, selling goods, borrowing money, transactions are happening every day and every minute. In the stock market, someone is selling the stock and at the same moment, one person is buying the same stock. Transactions between buyers and sellers are the country’s economy.

When someone spends, another person earns that money. This is very basic for economic growth. Countries like the US have the richest individuals and these rich people are spending a huge amount of money every day. They are spending and multiple people are getting their money. Money is transferred from one hand to another and as a result, the economy is growing. These riches are also creating demands for products and multiple jobs are created to supply the product they want. Opportunity for new jobs means earning an opportunity for common citizens, ultimately further growth of the economy. This is a cycle based on supply and demand.

Economic revolution depends on geographical location, educational qualifications of the citizens. The economy of California is exemplary thanks to Hollywood and Silicon Valley. There are millionaires and billionaires, thousands of jobs in different sectors, and world-famous universities. As a result, the economy of California is reaching sky-high with every passing year.

There are different types of economy. The most common economy is the market-based economy. Products are produced and sold according to the demand of locals. This economy is limited to only a small geographical area.

Command based economy is set by politicians of many countries. They decide the price of every item, even the locally produced fruits and vegetables. Many countries release yearly budget to let citizens know about the prices of produced goods.

A new age economy that is finding popularity is the green economy, but this economy is mostly meant for an already highly developed economy. This economy is based upon private donations and funds. The purpose of this economy is to decrease the pollution level and make the atmosphere healthier and to save energy for the future.

With the growing popularity of the internet, there is now a new type of economy and this innovation economy is called the gig economy. Jobs in various sectors are created via online platforms. This online job opportunity is contributing a lot toward the global economy. New generations of freelancers are working with top professionals around the world sitting right at their home. They are sitting in an Asian country and getting paid from an Australian company for the service they are providing. That is how amazing this is. The internet is creating workers without borders and helping the economy grow globally.


The economy is good until there is a balance between earning and spending. Not only a person goes broke if the spending is way more than earning, but a country’s entire economic system also fails due to overspending. Debt is the worst enemy of an economy. The spending should always be much less than the total earning.

Since multiple little factors decide the state of the economy these days, new research subjects are added to the field of economy. Sociology, applied science and finance are now taught as part of an economic lesson.

Saving, labour, productivity, demand and supply decide the status of the economy. Common citizens to millionaire investors, everyone contributes and plays an essential part in the country’s economy. More business, more transactions means more money. More money means more developed economy. Economy starts to suffer once the demands start to decrease. However, then some new ideas are developed and the economy gets a much-needed boost. This is how the economy is working the ancient times.