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To understand what is really happening one must first have some sort of background in economics. This section is aimed at presenting variables of a country's economy and what changes in these variables may do to an economy.

First, we must understand what determines countries' Gross Domestic Product (GDP) and expenditures. GDP = Consumption + Investment + Government Spending + (Exports Imports). This simple formula explains a country's financial position. So how do we get higher GDP?

There are many different ways to improve GDP but to understand how to go about this we must know what affects the variables that make up GDP. Consumption is a function of two factors. The first factor is autonomous consumption. This is how much a country consumes throughout day-to-day activity. The second thing that affects consumption is a country's income. Naturally, with a higher income, one is more likely to consume more goods. The next variable is investment. Investment is determined by the interest rate. As the interest rates rise, investment will fall. The next variable in line would have to be government spending. Government spending can not be changed by sources other then the government.

Finally, we get to exports and imports. Exports and imports are determined by the real value of money, domestic income, and foreign income. The real value of money is best described as a function of domestic prices divided by the exchange rate times foreign prices, in other words R= P/ep*. As the real money value increases then exports will fall. This is due to the fact that exports are now more expensive for other countries to buy. At the same time a higher valued currency means one is more inclined to import. If domestic income increases, then people are also more inclined to import. In the same context, if foreign income rises, then exports should increase. This is what determines GDP.

Another important factor to understand is Balance of Payments (BOP). BOP is a form of double entry accounting created to help determine a country's economic position. For example, a BOP deficit means a country is in debt, while a BOP surplus means a country has too much money. The idea is to be perfectly balanced. BOP is made up of two key areas; the current account balance (CAB) and the capital account balance (KAB). When added together, these would equal the BOP, in other words CAB+KAB=BOP. Every transaction made is classified as either being in the CAB or KAB. Once identified, we can use this form

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