Economics is a broad subject that can be divided into two areas: macroeconomics and microeconomics. To differentiate between the two, the analogy of the forest and the individual trees can be helpful. Macroeconomics is the study of the behaviors and activities of the economy as a whole; hence, the forest. Microeconomics looks at the behaviors and activities of individual households and firms, the individual components that make up the whole economy; hence, the individual trees. Several examples are given below.

Macroeconomics

Macroeconomics, being the study of the behaviors and activities of the economy as a whole, looks at such areas as the Federal Reserve System, unemployment, gross domestic product, and business cycles.

The Federal Reserve System was created by the Federal Reserve Act of 1913, which divided the United States into twelve districts with a Federal Reserve Bank located in each. Each of these banks is owned...