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Main Dictionary E


Economy is a system of economics that includes the sectors of production of goods (industry, agriculture, transport, etc.) and services (education, culture, health care, etc.). It provides society with material and intangible benefits.

Economy is primarily aimed at meeting unlimited human needs. Therefore, the efforts expended by people in the process of economic activity are a prerequisite for obtaining a good or service in the future.

Mission of the Economy

The major role of the economy is to manage:

  • production;
  • distribution;
  • exchange;
  • consumption.

Production is the first phase of the economic cycle. This phase ends with the creation of objects intended for consumption.

Distribution. The second phase of the economic cycle is the distribution of the goods produced. The distribution establishes the share of each person involved in production in the wealth created. This share depends on who owns the means of production and the labor force.

Exchange. The distributed goods are often unsuitable for personal consumption or are not really needed by the person who received them as a result of the distribution. Therefore, the economic cycle includes the third stage which is the exchange. Exchange relations are established between individuals and also between enterprises. Usually the exchange is made with the help of money.

Consumption. The final phase of the economic cycle is the consumption, the use of the produced goods. Consumption can be productive or personal. 

History of the Economy

One of the first to ever mention the term “economy” was Aristotle, a Greek philosopher and polymath during the Classical period in Ancient Greece. He was a significant scientist and one of the most influential philosophers of antiquity. In his work “Politics”, Aristotle offers one of the earliest accounts of the origin of money. According to his theory, money appeared in order to make people less dependent on each other and exchange conveniently. That is why people started to trade through the use of iron or silver.

Economy appeared when researchers began to think of the way to solve the basic problems that any wealthy citizen faced daily. They were looking for something rationalizing their household costs.

The second stage of the economy development is the appearance of economy schools. A school of economy is a group of people who share a common view on a problem in the field of economics. There are eight schools in the economy. They started to develop in the 16th-17th centuries and can be compared as stages of economy evolution. They are:

  • mercantilism;
  • physiocracy;
  • school of political economy;
  • marxism;
  • marginism;
  • neoclassicism;
  • keynesianism;
  • institutionalism;
  • neoconservatism.

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