ABSTRACT
The real-world economy is too complex to understand simply by observing it. Were that not the case, there would be no reason to study economics, because one could just observe economic phenomena and understand them through simple observation. Because of the complexity of economic phenomena, economic analysis is undertaken by developing models that are simplified depictions of reality. The idea is that interactions among the components of the model are analogous to interactions among the components of the economy. Thus, if one can understand the model, which is simpler than reality, by analogy one can understand the more complex economy.
