Why is economy important?

Greek oikonomia is a household. The English word means management, as in the class "Home Economy". Since management always involves pinching pennies, the word comes to mean frugality.

Did you buy something today? Let's imagine you bought a pencil. What color? What brand? Did you look for a certain product, or grab one from a bin near the checkout line? All such decisions in a particular area make up the economy of that area, measured in the local currency for convenience.

People who talk about "stimulating the economy" don't understand what the word means. A few years ago Congress decided to give people money to crush their cars and buy new cars. It was called "Cash For Clunkers". They thought this would "stimulate the economy". Strangely, all that money got spent on imported cars. It didn't even occur to the politicians that most cars are not made in America any more. Then people began to notice that prices of used car parts had risen drastically. It had not occurred to anybody that used parts come from used cars, and this stupid program had clobbered the sources.

This is called "Broken window fallacy" and you can search that term for a full explanation.
www.google.com/search?q=Broken+window+fallacy