When we say the economy, we refer to the different economic aspects of any country or area. It is very important for any business to consider the local economy before they decide on what business to engage in. There are many factors that affect how well your business will be doing, depending on the local economy. If you wish to become successful in any business, it is advisable to do some research on the possible changes in the local economy before venturing into it.
First of all, you have to determine the type of economy you want to be involved in. Basically, there are three kinds of economies – a market economy, a mixed economy, and a service economy. A market economy is a place where there is generalized commerce. In a market economy, individuals have access to a variety of goods and services that can be bought and sold. Because of this, the prices of products are flexible and consumers have room to bargain.
On the other hand, in a mixed economy, the state of economic affairs is not primarily dependent on the level of consumer spending and the availability of goods and services. In this kind of economy, some aspects of the economy depend on the industry it is linked to. This means, if there is more manufacturing in one area, more jobs can be created there. The same goes for the services sector that is linked to the health care industry and the service industries. Since these services are more expensive than goods, the residents of the areas generate more income through taxes than the actual price of these goods and services.
On the other hand, a simple economy is the opposite. In this kind of economy, the residents are able to obtain tangible goods without having to pay for a huge portion of their salaries. They can simply buy what they need at the most affordable prices possible. Because there are more businesses, transactions are more frequent and, because of the absence of a central authority or regulation, prices of goods tend to vary. A good example of this type of economy is the South Korean market.
In the South Korean economy, the government controls the price of basic goods. Prices of South Korean goods are far lower than those of the world’s prices. In addition, an anti-price policy has been implemented so as to prevent inflation. As a result, inflation has been avoided and economic systems have become more open to the demands of the consumer. Despite the above mentioned economic indicators, South Korea is a relatively simple economy to study since it has a single economy.
With the absence of a Central Bank, there is no need for the economy to adopt a certain economic system. It is left to the businesses to decide how they would allocate their capital. Since the government controls the money supply, the currency value is also determined by supply and demand. As such, South Korea has a flexible and enterprise-oriented economy. This means that businesses can freely choose their customers without worrying about the exchange rate.
However, the above mentioned does not mean that the economy is without any internal structures. Unlike the United States, in South Korea, the government implements fiscal policy. The role of fiscal policy is to stabilize the macroeconomic features of the economy in order to achieve higher economic growth. The role of monetary policy is to keep inflation from rising above the level the government has set.
The three factors, or more specifically, the rate of inflation, the unemployment rate, and the money supply all play a role in stabilizing the South Korean economy. In addition to these, the government has several mechanisms in place to deal with shocks to the economy. These include use of fiscal policy, rigid monetary policy, and direct injection of funds into the market.