An economy is actually a series of economies linked together, at the local, regional, national, and ultimately the international levels. For this reason, in other languages it is also called the conjuncture (German Konjunktur; French conjuncture).
In her book Cities and the Wealth of Nations, Jane Jacobs takes this insight one step further, viewing economies at their fundamental level as city-based and city-centered units, with with the larger economy being an interconnected complex of cities. For our present purposes we do not need to advance Jacobs’ thesis further, but it is well worth the reader’s perusal.
These economies likewise generate flows between each other, goods and services on the one hand and money flows on the other. But since they do not run in perfect synchronization, there will be imbalances generated between them. These come about, for instance, by the emergence of greater demand for the goods of one economy over the other, leading to an excess of “imports” to one economy, which are “exports” from the other. This imbalance will trigger a rebalancing, as prices and wages diverge. In the export economy, prices and wages will rise as a result of the net money inflow from exports; in the import economy, the reverse will happen. Higher prices and wages, in turn, will draw mobile factors of production, seeing as how a greater return can be obtained there. Mobile factors of production include raw materials, intermediate goods (goods used in the manufacture of other goods), and labor. On the other hand, lower prices and wages in the import economy attract capital and thus investment.