An economy is a place of exchange, production and distribution, and the exchange of goods and services among different economic agents. In simpler terms, it is said ‘the exchange of commodities on the market place.’ In simple terms, the economy refers to the condition of being prosperous or unhappy. It also implies the magnitude of satisfaction of consumers’ needs, which in turn influences the level of profitability to businesses. In fact, economic growth is considered to be the motor of a country.
According to economists, a healthy economy enjoys a surplus of consumption expenditure and a deficit of production expenditure. A healthy economy is a market economy, where there is strong demand for the output of other economic units. In other words, an economy is defined as ‘a market economy in which the volume of production of various economic units exceeds the total amount of consumption expenditure necessary for their reproduction’. In addition, it defines the rate of return to the exportation of goods. Economists also believe that the size and strength of the economy determine the level of international competitiveness.
Besides, economists also believe that a flourishing economy is based on the Gross Domestic Product (GDP) of a nation. According to them, a booming economy enjoys an increase in the levels of production of economic units. A healthy economy is one that possesses a standard of living that is adequate for the standard of living of its people. Moreover, an economically flourishing economy enjoys a diversified economy that combines advanced techniques of technology with improved methods of agricultural production and marketing. A thriving economy enables the exportation of products at prices that are favorable to the exporter’s industry and provide employment to millions of people.
A growing economy experiences high employment rates and high levels of investment. When the rate of investment matches the rate of production of economic units, the result is a rapid increase in the country’s production. High employment rates and high levels of investment provide a ready market for goods that are exported. A thriving economy enjoys a diversified economy that combines advanced techniques of technology with improved methods of agricultural production and marketing.
In spite of these important points, some economists believe that a flourishing economy will still require some basic adjustments. Growth can only be achieved if there is a consistent increase in the employment rate, a decrease in inflation and high employment levels. The combination of a high employment rate and low inflation is a sure recipe for sustained economic growth. Similarly, low levels of inflation and high employment rates are surest keys for high levels of national investment.
Aggregating data on employment rates and indicators such as the current inflation rate may not serve as enough data for an accurate evaluation of how the economy functions. Current indicators are not good enough to determine whether employment rates or investment will be positive for the long-term. The combination of several indicators is therefore the key to a healthy economy. If the evaluation takes into account both employment rates and investment, then the evaluation becomes more accurate than just using one indicator. The use of multiple indicators together provides a balanced view of the economy and thus allows the evaluation to be more reliable.
An evaluation of the health of the economy needs to take into account the role of government. The role of government in ensuring the sustainable performance of the economy is essential. Government should be encouraging investment, promoting industrial growth and ensuring industrial decentralisation. By doing so, the supply of skilled workers will be increased, allowing firms to expand and create jobs. Policy measures should be encouraging more home building, promoting higher education and creating more jobs in the rural communities. This can be done through better infrastructure and job creation.
Economic policies that focus on price stability can be effective in raising demand for goods and services, raising employment levels and stimulating economic activity. There is no doubt that price stability is a very important element in the economy. High employment levels are also an important feature of stable economies. The evaluation of the state of the economy should therefore consider employment levels. A good economy needs a mix of high employment and price stability.