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The word economy can be defined as activities related to the production and
distribution of goods and services in a particular geographic region. An economy
can mean the economy of a city (local economy), a country (national economy) or
the world as a whole (international economy), provided that it is involved in the
production of goods and services. There are three main sectors of economic
activity in an economy, they are as follows:
1. The primary sector- This includes activities directly related to natural
resources, e.g. farming, oil extraction etc.
2. The secondary sector- This includes the transformation of raw materials into
goods e.g. manufacturing steel into cars, or textiles into clothing.
3. The tertiary sector- This includes all the public and private sector
services e.g. Private sector- distribution, insurance, banking and finance and
Public sector- health and defense.
Metaphorically speaking, let's assume that the economy is a giant cake, we all
have a slice of the cake to eat, and may or may not be happy with the size of our
slice. If the economy grows, we would be able to see the overall size of the cake
increasing. Depending on if our individual slice grows, we would be able to share
in the growing economy. Even if we are not benefiting directly, we should still be
able to see some advantages to the growing economy. The reason for this is because
the extra economic growth should produce higher tax revenues, which can in turn,
be spent on public services that should benefit everyone.
Economic Growth
Economic growth is the increase in value of the goods and services produced by an
economy. The principal causes of economic growth are
•Increase in a country's productive capacity, as measured by comparing gross
national product (GNP) in a year with the GNP in the previous year.
•Increase in the capital stock advances in technology, and improvement in the
quality and level of literacy.
In order for businesses to grow and prosper, economic growth is important. It
relates to growth in the size and quality of the economy as a whole.