▪ I. economy e‧con‧o‧my 1 [ɪˈkɒnəmi ǁ ɪˈkɑː-] noun economies PLURALFORM
1. [countable] ECONOMICS the system by which a country's goods and services are produced and used, or a country considered in this way:
• the transformation from a centrally planned socialist economy to a market-led one
• He expects Europe's economies over the long run to grow faster than the US's.
business activities that take place unofficially, especially in order to avoid paying tax:
• It is impossible to quantify exactly the extent of the black economy.
an economy in which the government of a country owns most of the industry and makes all economic decisions:
• Russia began a program to switch from a centrally planned, command economy to a free market within 500 days.
— compare market economyexˈchange eˌconomy [countable] ECONOMICS
an economy in which goods are traded using money or exchanged for other goods:
• the establishment of an exchange economy, with markets and a single accepted currency
another name for market economy
ˌglobal eˈconomy [singular] ECONOMICS
the economy of the world seen as a whole:
• an interconnected global economy where billions of dollars and other currencies can be shifted at the touch of a button
ECONOMICS an economy that is not growing too slowly, with the risk of recession, or too fast, with the danger of overheating:
• Americans thought the Goldilocks economy of the 1990s would last forever.
inˈformal eˌconomy [countable] ECONOMICS
another name for shadow economy:
• Around 89 per cent work in the informal economy, as street vendors or landless labourers.
ˈknowledge eˌconomy
[countable] ECONOMICS an economy in which knowledge and information, and businesses based on them, are very important:
• The foundation of the knowledge economy is the information infrastructure of computers and telecommunications equipment.
an economy in which companies are not controlled by the government but decide for themselves what to produce and sell, based on what they believe they can make a profit from:
• The Colombian government has demonstrated its belief in a market economy by privatizing inefficient state companies.
ˌmixed eˈconomy [countable] ECONOMICS
an economy in which some industries are owned by the government and some are owned by private companies:
• The mixed economy is a middle way between the market economy and the command economy.
ˌparallel ecˈonomy [countable] ECONOMICS
another name for shadow economy
ˌplanned ecˈonomy ECONOMICS
[countable] another name for command economy
poˌlitical eˈconomy
1. [uncountable] ECONOMICS the study of the way countries organize the production and the use of wealth
• Haiti is the Caribbean country with the worst political economy whether measured by per capita income, life expectancy, or inflation.
ˈreal eˌconomy [singular] ECONOMICS
the part of the economy that is concerned with actually producing goods and services, as opposed to the part of the economy that is concerned with buying and selling on the financial markets :
• The Federal Reserve Bank was still putting up interest rates while the real economy was shrinking.
ˈservice eˌconomy [countable] ECONOMICS
an economic system that depends on selling services such as banking, transport, tourism etc, rather than on manufacturing, industry, farming etc:
• Following the industrial decline of the 1980s, all the evidence suggests that Britain has become a service economy.
ˈshadow eˌconomy [countable] ECONOMICS
business activities that are difficult for the authorities to find out about, for example because they are against the law; = SHADOW MARKET:
• The official sector is losing its appeal as many Russians can make more money by working in the shadow economy.
2. [uncountable] the careful use of money, goods, time etc so that nothing is wasted:
• For reasons of economy, the heating had been turned down.
• The post office was closed as part of an economy drive (= a planned effort to cut costs ) .
3. [countable] a way of spending less money:
• Following the merger, the group should make economies of about FFr200 million next year.
• As an economy measure, the company started to cut back on training.
4. false economy something that seems to be a way of spending less money, but actually costs you more money in the end:
• Buying cheaper, poorer quality materials is often a false economy.
[m0] ▪ II. economy economy 2 adjective [only before a noun]
1. an economy fare, hotel etc is cheaper than other things of the same type:
• You can choose from a range of economy and medium-priced hotels.
2. an economy-size product or packet contains more than a normal one and is cheap compared to the normal size product:
• a large economy-size packet of detergent
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An overview of how economies are measured. The words in bold are explained more fully under their individual entries.
Size and growth
The size of a country's economy, or its total output of goods and services, is measured by the gross national product or GNP, representing all the output that the country and its nationals own and control. GNP includes not only output produced within the country's boundaries, but also output overseas produced by the country's foreign investment or expatriate workers.
Gross national product can, however, overstate or understate what's actually happening inside the specific economy so a more commonly used measure of output is gross domestic product or GDP. That comprises all the output of goods and services produced within the country, even if some of it is produced by foreign capital and by foreign workers. A country such as Britain with large overseas investments will have a gross national product that is larger than its gross domestic product. Conversely an economy such as Saudi Arabia that uses lots of migrant labour will have a gross domestic product larger than its gross national product.
Not many people think of total GDP in currency terms when measuring an economy. It is unusual to state that the GDP of Norway is more than $160 billion. It's more usual to be aware of the relative size of economies, and to know that the US economy is about 60 times as large as Norway's. GDP per head gives a much clearer picture of relative wealth of nations, and on that measure Norway is slightly richer than the United States.
Even more important is the real, or inflation-adjusted, change in gross domestic product over a given period, which shows how quickly an economy is growing or shrinking. Real growth is measured by adding up the total output of goods and services and reducing that number by the GDP deflator, an official calculation of inflation. Growth is usually expressed as a percentage change. It can be the actual change in the period, or the annualized change in the period.
You can look at the overall size of an economy by measuring where income comes from - industrial production, agricultural production or the service sector. Or you can look at how output is consumed - by private consumption, public or government consumption, investment, or by being shipped abroad as net exports.
Some elements of GDP are easier to measure than others. Industrial production, or factory output, is relatively easy to assess and in most developed economies the change in industrial output is measured and published monthly. Agricultural output is less important to most economies, changes at a much slower seasonal pace and is subject to vagaries beyond the control of farmers. The service sector is also relatively hard to measure and requires estimates of output from sectors such as insurance, banking, the media and catering. There are other figures that give guidance on the level of industrial output, such as stocks (or inventories), new orders and backlogs.
On the spending side of the economy, the easiest factor to track is consumption, which is usually measured on a monthly basis through indices such as retail sales or the level of consumer credit. Economists and traders also want to know the likely pattern of future changes, so they watch closely for changes in indices of consumer confidence.
Government consumption can be tracked on a monthly basis through its own published figures. In theory it should be broadly predictable from figures published in the annual budget, and should not be subject to wild swings.
Investment is harder to track. It is often spent in large and unpredictable lumps. The final element of the consumption side of the national economy is net exports, which are tracked by trade figures.
Imports and exports of physical goods are relatively easy to track and monthly trade figures are an important indicator of the health of the economy. The measurement of trade in physical merchandise is added to figures on trade in invisibles to calculate the current account of the balance of payments. Movements in and out of the country of sums of capital for investment, borrowing and aid are measured in the capital account. The overall balance of payments comprises the current and the capital accounts.
Inflation
It is almost impossible to measure growth in an economy without knowing the rate of inflation. Measurements in money terms are useless because it is impossible to distinguish between real and nominal changes. Changes in prices, and in the level of inflation, can be measured at the retail level, using a consumer price index. Inflation can also be measured at other stages in the economy by capturing data on wholesale prices or factory gate prices.
Unemployment
The number of people in work and seeking work is a valuable measurement of economic activity. Unemployment figures are usually published monthly. Some economies also publish figures for employment, such as the non-farm payrolls in the United States. A related measure of the economy is the level of average earnings, which reflects supply and demand for labour.
Currency
The value of a country's currency and its relative movement against major traded currencies is a valuable indicator of the health of an economy. Some market analysts regard currency rates and interest rates as the best and most definitive signals. You need to know where a country has a free-floating exchange regime in which foreign exchange rates are set purely by supply and demand in the open market. If a country's currency does not float freely it may be fixed at a set rate which is defended by central bank intervention, the sale and purchase of foreign currencies to change rates. Or the currency may have a dirty float, with a rate defended only on certain occasions, or a crawling peg that allows controlled changes.
Balance of payments
The performance of a currency is largely affected by supply and demand, which in turn is dependent on the balance of payments. If a country is exporting more than its imports, and running a surplus on its balance of trade, then foreigners will want to hold its currency to buy its goods and the currency is likely to appreciate. Similarly if the country is an attractive place to invest then foreigners will demand its currency for foreign direct investment or portfolio investments. That influence will show up in the capital account of the balance of payments.
If the current and capital accounts are in deficit, or if there is a sudden loss of confidence in a country's economy, then the currency is likely to depreciate and may be subject to a formal devaluation. The pressure may show up first in a sharp drop in the country's foreign exchange reserves. If the pressure continues and the country is likely to run out of foreign currency to pay for essential imports it may have to turn to the International Monetary Fund for emergency assistance, which is usually granted only on strict conditions of economic reform.
Interest rates
Interest rates can be another major influence on a currency. High rates increase the reward for holding the currency and help to offset the risks of depreciation or devaluation. There is usually one key interest rate in an economy which acts as a benchmark for all other rates. In the United States it is the discount rate, which the Federal Reserve Bank charges to commercial banks for short-term loans. It is changed infrequently but gives important insight into the central bank's monetary policy and expectations. Markets also closely watch the Fed funds rate. Commercial banks borrow at that rate the funds they need to meet their reserve requirements with the central bank.
The overall level of interest rates in an economy often reflects the government's need to control inflation. High rates choke off demand for consumption and investment. Lower rates stimulate spending and can stimulate growth.
Budget
Interest rates can themselves be affected by the level of government spending, set out in its budget. If the government runs a large budget deficit, spending more than it collects in taxes, it can boost spending and inflation and can force up interest rates because of its competition for a limited supply of funds. Currency, equity and bond markets all watch closely for changes in government spending and tax collection, and the consequent changes in the overall budget deficit and level of government debt.
Money supply
At one time the money supply was a crucial economic indicator. Its importance has shrunk with the change of emphasis on controlling the economy through the price of money, or interest rates, rather than the supply of money.
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economy UK US /ɪˈkɒnəmi/ noun (plural economies)
► [C] ECONOMICS the system of making money and producing and distributing goods and services within a country or region: »
On average, China accounts for almost half of the total export growth of East Asian economies.
»The property and construction industries are no longer as dominant in the economy as they used to be.
»India has one of the fastest-growing economies in the world.
the global/national/local economy »Political leaders expressed concern at the effect of increasing oil prices on the global economy.
»a booming/strong/robust economy
»a slowing/weak/stagnant economy
an emerging/a developing/a developed economy »Hong Kong, Singapore, South Korea, and Taiwan are often categorized as emerging economies.
stimulate/boost/jump-start the economy »New legislation has boosted the rural economy as well as supporting local communities.
an economy grows/slows/recovers »In the year to the second quarter of 2007, the UK economy grew by 3.1%.
»a knowledge-/service-/cash-based economy
a slowdown/downturn in the economy »The Society of Motor Manufacturers and Traders said the decline in sales reflected the downturn in the economy.
► [C or U] the fact of not spending more money, using more resources, etc. than you need to: »
Many manufacturing processes have been outsourced to Eastern Europe for reasons of economy.
»Higher licence fees can tempt commercial organizations to make economies on service quality.
► [U] TRANSPORT ECONOMY CLASS(Cf. ↑economy class): »
Executives at the firm now fly economy, rather than club class.
→ See also THE BLACK ECONOMY(Cf. ↑the black economy), BUBBLE ECONOMY(Cf. ↑bubble economy), COMMAND ECONOMY(Cf. ↑command economy), DUAL ECONOMY(Cf. ↑dual economy), EXCHANGE ECONOMY(Cf. ↑exchange economy), EXPERIENCE ECONOMY(Cf. ↑experience economy), FREE ECONOMY(Cf. ↑free economy), FUEL ECONOMY(Cf. ↑fuel economy), THE GLOBAL ECONOMY(Cf. ↑the global economy), GOLDILOCKS ECONOMY(Cf. ↑Goldilocks economy), INFORMAL ECONOMY(Cf. ↑informal economy), INFORMATION ECONOMY(Cf. ↑information economy), KNOWLEDGE ECONOMY(Cf. ↑knowledge economy), MANAGED ECONOMY(Cf. ↑managed economy), MARKET ECONOMY(Cf. ↑market economy), MIXED ECONOMY(Cf. ↑mixed economy), THE NEW ECONOMY(Cf. ↑the new economy), PARALLEL ECONOMY(Cf. ↑parallel economy), PLANNED ECONOMY(Cf. ↑planned economy), POLITICAL ECONOMY(Cf. ↑political economy), REAL ECONOMY(Cf. ↑real economy), SERVICE ECONOMY(Cf. ↑service economy), THE SHADOW ECONOMY(Cf. ↑the shadow economy), SUBSISTENCE ECONOMY(Cf. ↑subsistence economy)
Financial and business terms. 2012.