How The Economy Works Pt. 1

 You may have noticed that whenever you pay that bill to buy that packet of Doritos you see a tax. This usually has a range of 2.9 to 7.25% (in the USA) of the item. This way the government makes some money for other activities like maintenance of the army and public places, organization of public events, paying of pensions, and government officers' salaries. In the end, every financial move you make leads to the economy moving. There are three main forces that drive the economy: Productivity growth, the long term debt cycle, and the short term debt cycle. The main thing which builds the entire economy is transactions. A transaction is an exchange of goods, services, and shares With credits or money. Physical money doesn't always make transactions though. Come to think of it the dead presidents cant do all the work so we have credit or an assurance. Just like buyers and sellers have transactions so do lenders and borrowers. Lenders are in the market for making money and increasing there total net worth by lending more money and borrowers need money for various things like buying a house or car, paying rent, or starting a business. Borrowers have to repay the money that they have borrowed ( which is called principal ) and with an extra amount called interest.