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Abstract
See Economics in Action!
In a world full of volatility, uncertainty and conflicting approaches, this market leading, concise text in introductory economics looks at the key economic issues of today and helps you make sense of them.
This new edition has been updated with the most recent data and coverage of economic issues such as growth, unemployment, the environment, Brexit and behavioural economics. Its classic features and clear, engaging writing style are complemented by strong theoretical basis and a wealth of pedagogical features to support learning. Expect real-life examples, case studies, questions and problems to guide your understanding.
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Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Front Cover | Front Cover | ||
| Half Title Page | i | ||
| Title Page | iii | ||
| Copyright Page | iv | ||
| About the authors | v | ||
| Brief contents | vii | ||
| Detailed contents | ix | ||
| Preface | xv | ||
| Student and lecturer resources | xv | ||
| Acknowledgements | xxi | ||
| Part A INTRODUCTION | 1 | ||
| Chapter 1 Economic issues | 2 | ||
| 1.1 Engaging with Economics | 3 | ||
| An island economy | 3 | ||
| Economic puzzles and issues | 3 | ||
| 1.2 The Economic Problem | 5 | ||
| The problem of scarcity | 5 | ||
| Demand and supply | 6 | ||
| 1.3 Dividing Up the Subject | 6 | ||
| Microeconomics | 7 | ||
| Macroeconomics | 9 | ||
| 1.4 Modelling Economic Relationships | 12 | ||
| The production possibility curve | 13 | ||
| The circular flow of goods and incomes | 15 | ||
| Models and data | 16 | ||
| 1.5 Economic Systems | 19 | ||
| The command economy | 20 | ||
| The free-market economy | 22 | ||
| The price mechanism | 22 | ||
| The mixed market economy | 26 | ||
| Chapter 1 Boxes | 8 | ||
| 1.1 The Opportunity Costs of Studying: What are you sacrificing? | 8 | ||
| 1.2 Business Cycles: The inherent volatility of economies | 11 | ||
| 1.3 Nominal and Real House Prices: Going through the roof | 18 | ||
| 1.4 Command Economies: Rise and fall of planning in Russia | 22 | ||
| Part B MICROECONOMICS | 29 | ||
| Chapter 2 Markets, demand and supply | 30 | ||
| 2.1 Demand | 31 | ||
| The relationship between demand and price | 31 | ||
| The demand curve | 31 | ||
| Other determinants of demand | 32 | ||
| Movements along and shifts in the demand curve | 33 | ||
| 2.2 Supply | 34 | ||
| Supply and price | 34 | ||
| The supply curve | 34 | ||
| Other determinants of supply | 35 | ||
| Movements along and shifts in the supply curve | 36 | ||
| 2.3 The Determination of Price | 36 | ||
| Equilibrium price and output | 36 | ||
| Movement to a new equilibrium | 43 | ||
| 2.4 The Free-Market Economy | 45 | ||
| Advantages of a free-market economy | 45 | ||
| Problems with a free-market economy | 45 | ||
| Chapter 2 Boxes | 38 | ||
| 2.1 UK House Prices: Unearthing the foundations of house price patterns | 38 | ||
| 2.2 Stock Market Prices: Taking stock of share prices | 40 | ||
| 2.3 Commodity Prices: Riding the commodities Big Dipper | 42 | ||
| Chapter 3 Markets in action | 48 | ||
| 3.1 Price Elasticity of Demand | 49 | ||
| The price elasticity of demand | 49 | ||
| Measuring the price elasticity of demand | 50 | ||
| Interpreting the figure for elasticity | 50 | ||
| Determinants of price elasticity of demand | 51 | ||
| 3.2 Price Elasticity of Demand and Consumer Expenditure | 52 | ||
| 3.3 Price Elasticity of Supply (PES) | 55 | ||
| The determinants of price elasticity of supply | 57 | ||
| 3.4 Other Elasticities | 57 | ||
| Income elasticity of demand | 57 | ||
| Cross-price elasticity of demand | 58 | ||
| 3.5 Markets and Adjustment over Time | 60 | ||
| Short-run and long-run adjustment | 60 | ||
| Price expectations and speculation | 60 | ||
| 3.6 Markets Where Prices are Controlled | 63 | ||
| Setting a minimum (high) price | 63 | ||
| Setting a maximum (low) price | 64 | ||
| Chapter 3 Boxes | 52 | ||
| 3.1 The Measurement of Elasticity | 52 | ||
| 3.2 Advertising and its Effect on Demand Curves: How to increase sales and price | 56 | ||
| 3.3 Elasticities and Relationships: Where there’s a relationship, there’s an elasticity | 59 | ||
| 3.4 Short Selling: Gambling on a fall in share prices | 63 | ||
| 3.5 A Minimum Unit Price for Alcohol: A way of reducing alcohol consumption | 65 | ||
| 3.6 UK Payday Loan Cap: Capping the cost of short-term credit | 66 | ||
| 3.7 The Effect of Imposing Taxes on Goods: Who ends up paying? | 68 | ||
| Chapter 4 The demand decision | 71 | ||
| 4.1 Consumer Choice | 72 | ||
| Utility and the rational consumer | 72 | ||
| The rational consumer’s optimal combination of goods | 75 | ||
| 4.2 The Timing of Costs and Benefits | 77 | ||
| Intertemporal choices | 77 | ||
| Maximising utility with intertemporal choices | 77 | ||
| 4.3 Uncertainty and Risk | 78 | ||
| Choice under risk and uncertainty | 78 | ||
| Attitudes towards risk | 80 | ||
| Insurance: a way of removing risks | 81 | ||
| Choices under asymmetric information | 83 | ||
| 4.4 Behavioural Economics | 85 | ||
| What is behavioural economics? | 85 | ||
| Processing limited information | 85 | ||
| Taking other people into account | 87 | ||
| Biased behaviour | 88 | ||
| Implications for economic policy | 89 | ||
| Chapter 4 Boxes | 73 | ||
| 4.1 Satisfaction and Consumer Demand: Identifying the benefit drivers | 73 | ||
| 4.2 Optimal Consumption Bundles: Equi-marginal principle in consumption | 76 | ||
| 4.3 Intertemporal Decision Making and the Rational Consumer: Incorporating impatience into models of consumer choice | 79 | ||
| 4.4 Futures Markets: A way of reducing uncertainty | 82 | ||
| 4.5 Problems with Insurance Markets: Adverse selection and moral hazard | 84 | ||
| 4.6 Nudging People: How to change behaviour without taking away choice | 90 | ||
| Chapter 5 The supply decision | 93 | ||
| 5.1 Production and Costs: Short Run | 94 | ||
| Short-run and long-run changes in production | 94 | ||
| Production in the short run: the law of diminishing returns | 94 | ||
| Measuring costs of production | 95 | ||
| Costs and output | 96 | ||
| 5.2 Production and Costs: Long Run | 102 | ||
| The scale of production | 102 | ||
| Long-run average cost | 104 | ||
| The relationship between long-run and short-run average cost curves | 106 | ||
| Long-run cost curves in practice | 106 | ||
| Postscript: decision- making in different time periods | 106 | ||
| 5.3 Revenue | 108 | ||
| Total, average and marginal revenue | 108 | ||
| Average and marginal revenue curves when price is not affected by the firm’s output | 110 | ||
| Average and marginal revenue curves when price varies with output | 110 | ||
| Shifts in revenue curves | 112 | ||
| 5.4 Profit Maximisation | 112 | ||
| Some qualifications | 113 | ||
| 5.5 Problems with Traditional Theory | 115 | ||
| Explaining actual producer behaviour | 115 | ||
| Alternative aims | 117 | ||
| Chapter 5 Boxes | 95 | ||
| 5.1 Diminishing Returns in the Bread Shop: Is the baker using his loaf? | 95 | ||
| 5.2 Malthus and the Dismal Science of Economics: Population growth + diminishing returns = starvation | 97 | ||
| 5.3 The Relationship Between Averages and Marginals | 99 | ||
| 5.4 Costs and the Economic Vulnerability of Firms: The behaviour of costs and firms’ financial well-being | 100 | ||
| 5.5 The Optimum Combinations of Inputs: Equi-marginal principle in production | 105 | ||
| 5.6 Minimum Efficient Scale: The extent of economies of scale in practice | 108 | ||
| Chapter 6 Market structures | 121 | ||
| 6.1 The Degree of Competition | 122 | ||
| 6.2 Perfect Competition | 123 | ||
| Assumptions | 123 | ||
| The short-run equilibrium of the firm | 124 | ||
| The short-run supply curve | 125 | ||
| The long-run equilibrium of the firm | 125 | ||
| 6.3 Monopoly | 127 | ||
| What is a monopoly? | 127 | ||
| Barriers to entry | 127 | ||
| Equilibrium price and output | 131 | ||
| Monopoly versus perfect competition: which best serves the public interest? | 132 | ||
| Potential competition or potential monopoly? The theory of contestable markets | 133 | ||
| 6.4 Monopolistic Competition | 136 | ||
| Assumptions | 136 | ||
| Equilibrium of the firm | 137 | ||
| Non-price competition | 138 | ||
| Monopolistic competition and the public interest | 138 | ||
| 6.5 Oligopoly | 139 | ||
| The two key features of oligopoly | 140 | ||
| Competition and collusion | 140 | ||
| Collusive oligopoly | 140 | ||
| Non-collusive oligopoly: the breakdown of collusion | 145 | ||
| Non-collusive oligopoly: assumptions about rivals’ behaviour | 145 | ||
| Oligopoly and the consumer | 147 | ||
| 6.6 Game Theory | 149 | ||
| Simultaneous single-move games | 149 | ||
| Repeated simultaneous-move games | 151 | ||
| Sequential move games | 152 | ||
| 6.7 Price Discrimination | 155 | ||
| Advantages to the firm | 157 | ||
| Price discrimination and the public interest | 157 | ||
| Chapter 6 Boxes | 128 | ||
| 6.1 E-Commerce: Has technology shifted market power? | 128 | ||
| 6.2 Breaking Sky’s Monopoly on Live Premier League Football: The sky is the limit for the English Premier League | 134 | ||
| 6.3 OPEC: The history of the world’s most famous cartel | 142 | ||
| 6.4 Buying Power: What’s being served up by the UK grocery sector? | 148 | ||
| 6.5 The Prisoners’ Dilemma: Choosing whether to deny or confess | 153 | ||
| 6.6 Profit-Maximising Prices and Output For a Third-Degree Price Discriminating Firm: Identifying different prices in different markets | 159 | ||
| Chapter 7 Wages and the distribution of income | 162 | ||
| 7.1 Wage Determination in a Perfect Market | 163 | ||
| Perfect labour markets | 163 | ||
| The supply of labour | 163 | ||
| The demand for labour: the marginal productivity theory | 164 | ||
| Wages and profits under perfect competition | 167 | ||
| 7.2 Wage Determination in Imperfect Markets | 168 | ||
| Firms with power | 168 | ||
| The role of trade unions | 169 | ||
| Bilateral monopoly | 169 | ||
| The efficiency wage hypothesis | 171 | ||
| 7.3 Inequality | 172 | ||
| Types of inequality | 172 | ||
| Measuring the size distribution of income | 174 | ||
| The functional distribution of income | 176 | ||
| The distribution of wealth | 180 | ||
| Causes of inequality | 181 | ||
| 7.4 The Redistribution of Income | 185 | ||
| Taxation | 185 | ||
| Benefits | 186 | ||
| The tax/benefit system and the problem of disincentives: the ‘poverty trap’ | 188 | ||
| Chapter 7 Boxes | 164 | ||
| 7.1 Labour Market Trends: Patterns in employment | 164 | ||
| 7.2 Wages under Bilateral Monopoly: All to play for? | 170 | ||
| 7.3 The Gender Pay Gap: Wage inequalities between men and women | 178 | ||
| 7.4 Minimum Wage Legislation: A way of helping the poor? | 182 | ||
| 7.5 Inequality and Economic Growth: Macroeconomic implications of income inequality | 184 | ||
| 7.6 Uk Tax Credits: An escape from the poverty trap? | 188 | ||
| Chapter 8 Market failures and government policy | 193 | ||
| 8.1 Social Efficiency | 194 | ||
| 8.2 Market Failures: Externalities and Public Goods | 196 | ||
| Externalities | 196 | ||
| Public goods | 199 | ||
| 8.3 Market Failures: Monopoly Power | 201 | ||
| Deadweight loss under monopoly | 201 | ||
| Conclusions | 202 | ||
| 8.4 Other Market Failures | 202 | ||
| Imperfect information | 202 | ||
| Immobility of factors and time lags in response | 203 | ||
| Protecting people’s interests | 203 | ||
| Other objectives | 204 | ||
| How far can economists go in advising governments? | 205 | ||
| 8.5 Government Intervention: Taxes and Subsidies | 206 | ||
| The use of taxes and subsidies | 206 | ||
| Assessing the use of taxes and subsidies | 208 | ||
| 8.6 Government Intervention: Laws and Regulation | 209 | ||
| Laws prohibiting or regulating undesirable structures or behaviour | 209 | ||
| Regulatory bodies | 209 | ||
| 8.7 Other Forms of Government Intervention | 212 | ||
| Changes in property rights | 212 | ||
| Provision of information | 213 | ||
| The direct provision of goods and services | 213 | ||
| Nationalisation and privatisation | 214 | ||
| 8.8 More or Less Intervention? | 216 | ||
| Drawbacks of government intervention | 216 | ||
| Advantages of the free market | 216 | ||
| Should there be more or less intervention in the market? | 217 | ||
| 8.9 The Environment: A Case Study in Market Failure | 217 | ||
| The environmental problem | 217 | ||
| Market failures | 218 | ||
| Policy alternatives | 218 | ||
| How much can we rely on governments? | 226 | ||
| Chapter 8 Boxes | 200 | ||
| 8.1 The Tragedy of the Commons: The depletion of common resources | 200 | ||
| 8.2 Should Health-Care Provision be Left to the Market?: A case of multiple market failures | 204 | ||
| 8.3 Green Taxes: Are they the answer to the problem of pollution? | 220 | ||
| 8.4 Trading our Way out of Climate Change: The EU carbon trading system | 222 | ||
| 8.5 The Problem of Urban Traffic Congestion: Does Singapore have the answer? | 224 | ||
| Part C MACROECONOMICS | 231 | ||
| Chapter 9 Aggregate demand and the business cycle | 232 | ||
| 9.1 Introduction to Macroeconomics | 233 | ||
| Key macroeconomic issues | 233 | ||
| Government macroeconomic policy | 239 | ||
| 9.2 cEconomic Volatility and the Business Cycle | 240 | ||
| The hypothetical business cycle | 240 | ||
| The business cycle in practice | 241 | ||
| Spending, output and the business cycle | 241 | ||
| 9.3 The Circular Flow of Income Model | 244 | ||
| The inner flow, withdrawals and injections | 245 | ||
| The relationship between withdrawals and injections | 247 | ||
| Equilibrium in the circular flow | 248 | ||
| 9.4 Simple Keynesian Model of National Income Determination | 248 | ||
| Showing equilibrium with a Keynesian diagram | 249 | ||
| The withdrawals and injections approach | 249 | ||
| The income and expenditure approach | 250 | ||
| 9.5 The Multiplier | 252 | ||
| The withdrawals and injections approach | 253 | ||
| The income and expenditure approach | 254 | ||
| The multiplier: a numerical illustration | 255 | ||
| The multiplier and the full-employment level of national income | 255 | ||
| 9.6 The Volatility of Private-Sector Spending | 258 | ||
| Consumption cycles | 258 | ||
| Instability of investment | 261 | ||
| The role of the financial sector | 263 | ||
| What determines the turning points? | 264 | ||
| 9.7 Appendix Measuring National Income and Output | 266 | ||
| The product method | 266 | ||
| The income method | 267 | ||
| The expenditure method | 267 | ||
| From GDP to national income | 269 | ||
| Households’ disposable income | 269 | ||
| Taking account of inflation | 270 | ||
| Chapter 9 Boxes | 242 | ||
| 9.1 Output Gaps and the Business Cycle: An alternative measure of excess or deficient demand | 242 | ||
| 9.2 The Consumption Function: The relationship between consumption and income | 252 | ||
| 9.3 Sentiment and Spending: Does sentiment help to forecast spending? | 264 | ||
| 9.4 Making Sense of Nominal and Real GDP: The interesting case of nominal and real Japanese GDP | 270 | ||
| Chapter 10 Aggregate supply and economic growth | 273 | ||
| 10.1 The AD/AS Model | 274 | ||
| The aggregate demand curve | 274 | ||
| The aggregate supply curve | 275 | ||
| Equilibrium | 276 | ||
| 10.2 Alternative Perspectives on Aggregate Supply | 278 | ||
| The short-run aggregate supply curve | 278 | ||
| The long-run aggregate supply curve | 281 | ||
| Areas of general agreement | 283 | ||
| 10.3 Introduction to Long-Term Economic Growth | 284 | ||
| Long-run growth and the AD/AS model | 284 | ||
| Comparing the growth performance of different countries | 285 | ||
| The causes of economic growth | 286 | ||
| 10.4 Economic Growth without Technological Progress | 287 | ||
| Capital accumulation and capital deepening | 287 | ||
| A simple model of growth | 291 | ||
| The neoclassical growth model | 292 | ||
| 10.5 Economic Growth with Technological Progress | 295 | ||
| Technological progress and the neoclassical model | 295 | ||
| Endogenous growth theory | 296 | ||
| Chapter 10 Boxes | 278 | ||
| 10.1 Short-run Aggregate Supply: The importance of micro foundations | 278 | ||
| 10.2 Measuring Labour Productivity: Mind the UK productivity gap | 288 | ||
| 10.3 Getting Intensive with Physical Capital: Capital intensity and labour productivity | 290 | ||
| 10.4 UK Human Capital: Estimating the capabilities of the labour force | 298 | ||
| Chapter 11 The financial system, money and interest rates | 301 | ||
| 11.1 The Meaning and Functions of Money | 302 | ||
| The functions of money | 302 | ||
| What should count as money? | 303 | ||
| 11.2 The Financial System | 303 | ||
| The banking system | 303 | ||
| Deposit taking and lending | 305 | ||
| Profitability, liquidity and capital adequacy | 310 | ||
| Strengthening international regulation of capital adequacy and liquidity | 313 | ||
| The central bank | 317 | ||
| The role of the money markets | 319 | ||
| 11.3 The Supply of Money | 321 | ||
| The creation of credit | 322 | ||
| The creation of credit: the real world | 323 | ||
| What causes money supply to rise? | 325 | ||
| The flow of funds equation | 326 | ||
| Credit cycles | 328 | ||
| The relationship between money supply and the rate of interest | 328 | ||
| 11.4 The Demand for Money | 331 | ||
| What determines the size of the demand for money? | 331 | ||
| Equilibrium in the money market | 333 | ||
| The link between the money and goods markets | 334 | ||
| The equation of exchange | 336 | ||
| Money and aggregate demand | 337 | ||
| Chapter 11 Boxes | 304 | ||
| 11.1 Financial Intermediation: What is it that banks do? | 304 | ||
| 11.2 The Growth of Banks’ Balance Sheets: The rise of wholesale funding | 308 | ||
| 11.3 The Rise of Securitisation: Spreading the risk or promoting a crisis? | 314 | ||
| 11.4 Minsky’s Financial Instability Hypothesis: Are credit cycles inevitable? | 329 | ||
| Chapter 12 Output, unemployment and inflation | 341 | ||
| 12.1 Unemployment | 342 | ||
| Measuring unemployment | 342 | ||
| Unemployment trends | 342 | ||
| Unemployment and the labour market | 344 | ||
| Types of disequilibrium unemployment | 346 | ||
| Types of equilibrium unemployment (or natural unemployment) | 348 | ||
| Long-term changes in unemployment | 349 | ||
| 12.2 Inflation | 352 | ||
| Introduction to the causes of inflation | 352 | ||
| 12.3 The Relationship Between Output, Unemployment And Inflation: The Short Run | 357 | ||
| The AD/AS model | 357 | ||
| The Phillips curve | 359 | ||
| 12.4 The Relationship Between Inflation and Unemployment: Introducing Expectations | 363 | ||
| The expectations-augmented Phillips curve | 363 | ||
| Natural rate hypothesis | 363 | ||
| The accelerationist hypothesis | 365 | ||
| New classical perspective | 365 | ||
| Keynesian views | 368 | ||
| 12.5 Inflation Rate Targeting | 369 | ||
| Chapter 12 Boxes | 344 | ||
| 12.1 The Costs of Unemployment: Is it just the unemployed who suffer? | 344 | ||
| 12.2 The Duration of Unemployment: Taking a dip in the unemployment pool | 347 | ||
| 12.3 The Costs of Inflation: Who loses and by how much? | 353 | ||
| 12.4 Cost Push Illusion: When rising costs are not cost-push inflation | 356 | ||
| 12.5 Mind the Gap: Do output gaps explain inflation? | 360 | ||
| 12.6 The Accelerationist Hypothesis: The race to outpace inflationary expectations | 366 | ||
| Chapter 13 Macroeconomic policy | 374 | ||
| 13.1 Fiscal Policy and the Public Finances | 375 | ||
| Roles for fiscal policy | 375 | ||
| Public-sector finances | 375 | ||
| Sustainability of public finances | 378 | ||
| The business cycle and the public finances | 378 | ||
| The fiscal stance | 378 | ||
| 13.2 The Use of Fiscal Policy | 379 | ||
| The effectiveness of fiscal policy | 382 | ||
| Problems of magnitude | 382 | ||
| The problem of timing | 384 | ||
| Fiscal rules | 385 | ||
| 13.3 Monetary Policy | 386 | ||
| The policy setting | 387 | ||
| Control of the money supply over the medium and long term | 388 | ||
| Short-term monetary measures | 389 | ||
| Techniques to control the money supply | 390 | ||
| Techniques to control interest rates | 391 | ||
| Using monetary policy | 396 | ||
| 13.4 Demand-Side Policy | 398 | ||
| Attitudes towards demand management | 398 | ||
| The case for rules and policy frameworks | 399 | ||
| The case for discretion | 400 | ||
| Central banks and a Taylor rule | 401 | ||
| Conclusions | 401 | ||
| 13.5 Supply-Side Policy | 402 | ||
| Market-orientated supply-side policies | 402 | ||
| Interventionist supply-side policies | 405 | ||
| The link between demand-side and supply-side policies | 407 | ||
| Chapter 13 Boxes | 380 | ||
| 13.1 Primary Surpluses and Sustainable Public Finances: The fiscal arithmetic of government debt | 380 | ||
| 13.2 The Financial Crisis and the UK Fiscal Policy Yo-Yo: Trying to find the balance between rules and discretion | 382 | ||
| 13.3 Evolving Fiscal Frameworks in the European Union: Constraining the fiscal discretion of national governments | 386 | ||
| 13.4 The Daily Operation of Monetary Policy: What goes on at Threadneedle Street? | 392 | ||
| 13.5 Monetary Policy in the Eurozone: The role of the ECB | 394 | ||
| 13.6 Quantitative Easing: Rethinking monetary policy in hard times | 396 | ||
| 13.7 Public Funding of Apprenticeships: Reforms to apprenticeships in England | 408 | ||
| Part D INTERNATIONAL ECONOMICS | 413 | ||
| Chapter 14 Globalisation and international trade | 414 | ||
| 14.1 Global Interdependence | 415 | ||
| Interdependence through trade | 415 | ||
| Financial interdependence | 417 | ||
| International business cycles | 418 | ||
| Global policy response | 418 | ||
| 14.2 The Advantages of Trade | 418 | ||
| Trading patterns | 418 | ||
| Specialisation as the basis for trade | 421 | ||
| The law of comparative advantage | 421 | ||
| The gains from trade based on comparative advantage | 422 | ||
| Other reasons for gains from trade | 423 | ||
| The terms of trade | 423 | ||
| 14.3 Arguments for Restricting Trade | 424 | ||
| Arguments in favour of restricting trade | 424 | ||
| Problems with protection | 427 | ||
| 14.4 The World Trading System and the WTO | 428 | ||
| 14.5 Trading Blocs | 431 | ||
| Types of preferential trading arrangement | 431 | ||
| The direct effects of a customs union: trade creation and trade diversion | 432 | ||
| Longer-term effects of a customs union | 432 | ||
| Preferential trading in practice | 433 | ||
| 14.6 The European Union | 435 | ||
| From customs union to common market | 435 | ||
| The benefits and costs of the single market | 436 | ||
| Completing the internal market | 437 | ||
| The effect of the new member states | 438 | ||
| 14.7 The UK and Brexit | 439 | ||
| Alternative trading arrangements | 439 | ||
| Long-term growth, trade and Brexit | 439 | ||
| 14.8 Trade and Developing Countries | 442 | ||
| The relationship between trade and development | 442 | ||
| Trade strategies | 443 | ||
| Approach 1: Exporting primaries – exploiting comparative advantage | 443 | ||
| Approach 2: Import-substituting industrialisation (ISI) | 446 | ||
| Approach 3: Exporting manufactures – a possible way forward? | 447 | ||
| Chapter 14 Boxes | 416 | ||
| 14.1 Trade Imbalance in the USA and China: An illustration of economic and financial interdependencies | 416 | ||
| 14.2 Trading Places: Partners in trade | 420 | ||
| 14.3 Do we Exploit Foreign Workers by Buying Cheap Foreign Imports? | 426 | ||
| 14.4 The Doha Development Agenda: A new direction for the WTO? | 430 | ||
| 14.5 Features of The Single Market | 436 | ||
| 14.6 The Evolving Comparative Advantage of China: Riding the dragon | 448 | ||
| Chapter 15 Balance of payments and exchange rates | 453 | ||
| 15.1 The Balance of Payments Account | 454 | ||
| The current account | 454 | ||
| The capital account | 455 | ||
| The financial account | 456 | ||
| 15.2 Exchange Rates | 457 | ||
| Determination of the rate of exchange in a free market | 460 | ||
| 15.3 Exchange Rates and the Balance of Payments | 462 | ||
| Exchange rates and the balance of payments: no government or central bank intervention | 462 | ||
| Exchange rates and the balance of payments: with government or central bank intervention | 463 | ||
| 15.4 Fixed Versus Floating Exchange Rates | 464 | ||
| Advantages of fixed exchange rates | 464 | ||
| Disadvantages of fixed exchange rates | 464 | ||
| Advantages of a free-floating exchange rate | 465 | ||
| Disadvantages of a free-floating exchange rate | 466 | ||
| Exchange rates in practice | 467 | ||
| 15.5 The Origins of the Euro | 470 | ||
| The ERM | 470 | ||
| The Maastricht Treaty and the road to the single currency | 471 | ||
| 15.6 Economic and Monetary Union (EMU) in Europe | 472 | ||
| Birth of the euro | 472 | ||
| Advantages of the single currency | 472 | ||
| Opposition to EMU | 473 | ||
| Future of the euro | 475 | ||
| 15.7 Debt and Developing Countries | 479 | ||
| The oil shocks of the 1970s | 479 | ||
| Dealing with the debt | 481 | ||
| Chapter 15 Boxes | 459 | ||
| 15.1 Nominal and Real Exchange Rates: Searching for a real advantage | 459 | ||
| 15.2 Dealing in Foreign Currencies: A daily juggling act | 462 | ||
| 15.3 The Importance of International Financial Movements: How a current account deficit can coincide with an appreciating exchange rate | 466 | ||
| 15.4 The Euro/Dollar See-Saw: Ups and downs in the currency market | 468 | ||
| 15.5 Optimal Currency Areas: When it pays to pay in the same currency | 474 | ||
| Websites appendix | W:1 | ||
| Key ideas and glossary | K:1 | ||
| Index | I:1 | ||
| Back Cover | 511 |