ABSTRACT
You cannot build a comfortable, secure house without a good understanding of construction materials, pipes, and building techniques. Likewise, in order to understand how societies might be able to achieve the macroeconomic goals of good living standards, stability, and sustainability we first need to examine some of the “building blocks” of any economy. In this chapter, we develop a foundation for understanding how the macroeconomy works by introducing the four essential economic activities and examining the role of markets in the economy. A more in-depth analysis of these concepts, including questions on how production and consumption decisions are made, is the subject of microeconomics, not macroeconomics. But the issues discussed in this chapter form a basis for both microeconomic and macroeconomic understanding.
