The U.S. economy is a $10 trillion system of production and consumption, but it can be broken down and analyzed. The major players—consumers, businesses, and government—constantly interact with one another. Each interaction, whether it is a purchase or sale, investment or paycheck, tax or loan, constitutes a transaction and a form of economic activity.
It is that economic activity—and the millions of decisions that underlie that activity—that add up to our economy. The same is true of the economies of other nations, although some of them depend on exports and imports far more than the U.S. economy. Economics is the study of the interactions of these various players in the economy, and of the motivation behind and the effects of the decisions that drive these interactions.
Excerpted from The Complete Idiot's Guide to Economics © 2003 by Tom Gorman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.