Economic theory and policy

Economic theory is the study of how people, businesses, and governments make choices about using resources like money, labor, and materials. It helps explain how markets work, why prices change, and how economic activity affects everyone's well-being. Economic policy involves using these insights to create rules and strategies—such as adjusting interest rates, taxes, or government spending—to promote stable growth, control inflation, reduce unemployment, and improve overall living standards. Together, theory and policy aim to manage the economy effectively for the benefit of society.