ABSTRACT
The analysis of an economic system is done on two levels namely microeconomics and macroeconomics. Microeconomics is the study of individual behavior in the economy, as well as of specific markets. Macroeconomics deals with the national economy as a whole, that is, with the large picture, or the forest. It is one thing to describe the American economy as a mixed-market economy based on the principles of classical capitalism as outlined by Adam Smith, and another thing to know the mechanisms by which such a system functions. Economists illustrate demand with a graph in which the combinations of prices and quantities appear in the shape of a curve, the demand curve. Fiscal policy is one alternative open to government in its attempts to change the outcomes of the economy to correspond to the public interest. Another is monetary policy, which avails itself of the influence of income and credit available to individuals and firms.
