One definition of "economy" is the management of a nation's, state's or community's resources, especially in regard to money. A similar and somewhat intertwined definition is the prosperity of such a place.
These definitions are the meaning of the word when one uses it to talk about "the economy." The nation's economy is good or bad depending on its prosperity and the management of its resources.
In other uses of the word, "economy" generally refers to a sort of thriftiness. In the sentence, "He implemented economy in his budgeting practices," the subject is being frugal. When used as an adjective, as in the phrase "an economy car," economy means costing less.