The Nature of Money

  Money is a modern, refined, trading system.  In ancient days, money came in the form of possessions. When you wanted something someone else had, you traded something you owned for it.
  Today, money is made when banks make loans.  After someone makes money, they "trade" it for whatever they want to own. After its creation, money is circulated by banks, people, and the Federal Reserve.
  The Federal Reserve has most of the power over the money supply.  It can raise or lower the amount of money made, by buying or selling bonds. In doing so, it can slow down the economy, or boost it's growth.
  Although the Federal Reserve holds a lot of the money, it doesn't hold all of it.  There are two other excess sources of money that are held by the people, and the banks.  This keeps the Federal Reserve from becoming a total dictator over the money supply.

Supply and Demand

   Supply and Demand are two of the most important factors in economics.  When the price of a product lowers, the demand for that product increases.  People are more willing to buy a new product after its price has lowered over time.  When the supply of the product decreases, the price of the product increases.  Once a product has become low in supply, it becomes more rare, valuable, and expensive.
  When the wages of workers increase, so does the demand for products.  With a person's new amount of money, a new list of products becomes available to him and he demands more.
  Even though a product may be popular and in high demand, if the cost to make the product increases, the supply will decrease.  But, if the price of the product increases on the market, the creators of the product will strive to meet the demand by creating more of the product.
  Supply and Demand are constantly fluctuating, because of this, the creators of products attempt to find balance between the two tugging forces.  Producers keep their products from exceeding the amount demanded while avoiding supply shortages by increasing or decreasing the price of their products.  By keeping supply and demand under control through pricing their products, producers can maintain equilibrium.