Money and Finance: Economics for Kids

History Biography Geography Science Games

Economics

What is an economy?

An economy is a system for allocating resources to meet people's needs and wants. It determines how goods and services are made and exchanged. The study of the economy is called economics and a person who studies economics is called an economist.

The Economy

You've probably heard people talk about "the economy." When people say this they are usually referring to the economy of the country where they live. A good economy is generally one where there are lots of good-paying jobs, businesses are making money, and the overall economy of the country is growing. A bad economy is one where people are losing their jobs, businesses are shutting down, and the overall economy isn't growing.

Micro vs. Macro

Economics is often divided up into macroeconomics and microeconomics.

Microeconomics studies how individuals and businesses make decisions within the economy. Examples of microeconomics include:

Why someone chooses to buy one product over another
How the supply and demand of products work together
What price a company charges for its product
Why different jobs make different amounts of money

Macroeconomics looks at a bigger picture than microeconomics. It looks at the economy as a whole and not individuals or small businesses. Examples of macroeconomics include:

The Gross National Product of a country
Unemployment rates
Net imports and exports for a country and how this affects jobs
The current rate of inflation

Goods and Services

Two important terms in an economy are goods and services. Goods are physical objects that are bought and sold. They include things like cars, food, and clothes. Services are actions that one person pays another to do for them. Services include things like medical care, teaching, fire-fighting, and baby-sitting.

Types of Economies

Traditional - A traditional economy is typically based on bartering, trading, and farming. The economy is largely determined by how things have been done in the past with little change. People in traditional economies tend to do the same jobs as their parents.
Market - A market economy (sometimes called a "free market") is one based on supply and demand. Consumers are free to buy whatever product they want. Companies can make whatever product they want. There is little government intervention allowing the economy to sort itself out through competition.
Command or Planned - A command economy is one where the government closely controls the economy. The government determines what goods are manufactured, the price they will be sold, and who gets the profits. The government owns many of the major industries.
Mixed - A mixed economy is a combination of a market and a command economy. Some industries are owned and controlled by the government, while other industries are allowed to be determined by the market. Mixed economies vary in how much control and regulations the government has.

What type of economy is the United States?

The United States, like most countries today, is a mixed economy. The government controls some industries and places regulations on other industries, but much of the economy is allowed to run as a free market.

Learn More about Money and Finance:

Personal Finance

Budgeting
Filling out a Check
Managing a Checkbook
How to Save
Credit Cards
How a Mortgage Works
Investing
How Interest Works
Insurance Basics
Identity Theft

About Money

History of Money
How Coins are Made
How Paper Money is Made
Counterfeit Money
United States Currency
World Currencies

Money Math

Counting Money
Making Change
Basic Money Math
Money Word Problems: Addition and Subtraction
Money Word Problems: Multiplication and Addition
Money Word Problems: Interest and Percent

Economics

Economics
How Banks Work
How the Stock Market Works
Supply and Demand
Supply and Demand Examples
Economic Cycle
Capitalism
Communism
Adam Smith
How Taxes Work
Glossary and Terms

Note: This information is not to be used for individual legal, tax, or investment advice. You should always contact a professional financial or tax advisor before making financial decisions.

Back to Money and Finance

US History
Native Americans
Colonial America
American Revolution
Industrial Revolution
American Civil War
Westward Expansion
The Great Depression
Civil Rights Movement
Pre-1900s
1900 to Present
US Government
US State History

Homework
Animals
Math
History
Biography
Money and Finance

Biography
Artists
Civil Rights Leaders
Entrepreneurs
Explorers
Inventors and Scientists
Women Leaders
World Leaders
US Presidents

Games
Math Games
Puzzle Games
Word Games
Geography Games
Classic Games
Sports Games
Arcade Games
Typing Games

World History
Ancient Africa
Ancient China
Ancient Egypt
Ancient Greece
Ancient Mesopotamia
Ancient Rome
Middle Ages
Islamic Empire
Renaissance
Aztec, Maya, Inca
French Revolution
World War 1
World War 2
Cold War
Art History

Science
Biology
Chemistry
Earth Science
Physics

Geography
United States
Africa
Asia
Central America
Europe
Middle East
North America
Oceania
South America
Southeast Asia

Fun Stuff
Arts and Crafts
Holidays
Jokes for Kids
Movies
Music
Sports