Unlike finite state automata, can make reference to phrasal categories
Take the part-whole relationship as fundamental
A sentence analysis consist of phrases, which may consist of phrases or words.
A grammar consists of a set of context-free rewrite rules
S → NP VP PU
NP → JJ NN | JJ NNS | NP PP
VP → VBD NP
PP → IN PP
NN → news | effect
NNS → markets
JJ → economic | little | financial
VBD → had
IN → on
PU → .