What Is a Game Economy?
A game economy is the system of currencies, faucets (ways to earn them), and sinks (ways to spend them) that governs how resources move through a game. Any game with currency, crafting, or loot has an economy, whether or not anyone designed it as one.
Definition
A faucet is any way currency enters the system — quest rewards, daily logins, loot drops. A sink is any way it leaves — crafting costs, repairs, cosmetics, upgrades. When faucets outpace sinks, currency inflates until it stops feeling meaningful; when sinks outpace faucets, currency feels impossible to earn.
Example
Illustrative example A game that adds a new daily-reward currency source without adding anything new worth spending it on will, within a few weeks, have a player base sitting on large unspent balances — a visible sign the faucet/sink ratio has drifted out of balance.
Why It Matters
An economy that inflates or stagnates undermines the sense of progress a game is trying to create, no matter how good the content around it is. Because faucets and sinks interact with progression and difficulty too, economy health is usually the first place to check when a game "feels off" in ways that are hard to pin down.