Explore the economy

The word economy describes how a country or place is doing in making goods, and how much money it has. The amount a country sells and makes is called economic activity.

There are a wide range of goods that countries can sell, such as:

• cars
• fridges
• computers
• clothing
• bananas
• fish

If a country has a lot of goods that are in high demand then it can become wealthier by selling them. Businesses employ more people to make goods and people have more money to spend.

This is known as a boom or an upturn.

However, if demand falls, then prices will also fall. As a consequence, this will make the country poorer. Businesses employ fewer people and people have less money to spend.

This is known as a slump, or a downturn.

If people want to sell things there must be other people who want to buy them.

The more people want something, the more demand there is. That means that they can be sold for more money.

However, if there are lots of people selling (or supplying) the same goods, and there are not many people who want to buy those goods, then the demand will drop and the prices will be lower.

This is called supply and demand.

Industries

Manufacturing industries are when things are made to be sold, such as clothing, toys or equipment.

Agricultural industries are when things are grown or cultivated, such as food crops and farm animals or forestry.

Service industries are where people sell a service or a skill, such as banking, insurance or hospitality.

Economic growth and poverty

• Economic growth is when average income (what people earn) grows over time.
• Extreme poverty is when a person lives on less than 1.90 international dollars per day. That’s about £1.50.
• The number of people living in extreme poverty has fallen over the past 30 years, as economic growth happens.
• The World Bank says that around 700 million people live in extreme poverty across the globe.

A trade deal is a set of rules agreed between two or more countries on how they buy and sell goods and services to each other.

A country will enter into trade deals with another country if they believe it will benefit their economy.

Countries need a market for the goods they produce for export or the services they have to offer. Trade deals also make trading easier.

The UK had a special trading agreement with a block of countries called the European Union. In June 2016 the people of the UK voted for the UK to leave the European Union. This is referred to as Brexit. Since then, the UK government has been looking to make good trade deals with other countries.

Sustainable development is when people think about balancing the needs of the people and the environment, as well as developing the economy.

People

• How does this economic activity affect people’s health?
• How happy and contented are people who work in this industry?

Environment

• How is the environment affected by this economic activity?
• Are the resources used going to run out or are steps taken to replant, regrow or replace them?

Economy

• How profitable is this economic activity?
• How reliable and secure are jobs in this industry?