Q&A - What is the economy?
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The economy describes the total of economic activity taking place each day
You see it mentioned in the news everyday. Words like recession, downturn, consumer spending, GDP and other economics terms are all connected to the economy – but what is the economy?
Economic activity is about the buying and selling that goes on – including all the production activities to support that buying and selling. So, it includes
• Consumers and households buying goods and services (consumer spending)
• Businesses buying goods and services and investing in production
• Governments providing goods and services (e.g. health, education, defence) through government spending
The value of all these activities is measured by official statistics in each country. The main measure of economic activity is known as Gross Domestic Product – which is usually shortened to GDP.
For a large and complex economy like the UK, you shouldn’t be surprised to hear that the value of GDP is substantial. In 2008, UK GDP was valued at approximately $2,674 billion (for international comparisons GDP tends to be quoted in dollars). That is approximately $44,000 per person in the UK.
The UK economy is one of the largest in the world, but is some way behind economies such as the USA (GDP in 2008 - $14,264 billion) and China (GDP in 2008 of $4,401). According to the International Monetary Fund, in 2008, the UK was the 8th largest economy in the world.
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