Features

Consult Core Econ’s Fact checker for a detailed list of sources.

Building blocks

• Macroeconomics 1.5–1.7: The WS–PS model of the supply side of the macroeconomy
• Macroeconomics 3.6–3.8: The multiplier model
• Macroeconomics 4.4–4.6: The inflation (Phillips curve) model
• Macroeconomics 4.7–4.8: The business cycle model
• Macroeconomics 5.2–5.4: Role of fiscal and monetary policy
• Macroeconomics 5.9–5.10: Monetary policy and inflation
• Macroeconomics 5.13–5.14: The domestic and exchange rate channels for the transmission of monetary policy
• Macroeconomics 5.14: Monetary policy and the exchange rate
• Macroeconomics 6.2–6.4: Debt, financial sector, and banks
• Macroeconomics 6.6: Introducing the central bank
• Microeconomics 2.2: Economic decisions: Opportunity costs, economic rents, and incentives
• Microeconomics 2.8: Economic models: How to see more by looking at less
• Microeconomics 4.2–4.13: Game theory, Nash equilibrium, and coordination games
• Microeconomics 5.12: Measuring economic inequality: The Gini coefficient
• Microeconomics 6.10: Combining recruitment and labour discipline: The wage-setting model
• Microeconomics 6.11: Putting the wage-setting model to work: Wages, employment, and the rate of unemployment
• Microeconomics 8.2–8.3: Demand and supply curves

Extensions

• Extension 1.7: Deriving the price-setting real wage
• Extension 2.2: Owners, workers, and the profit share
• Extension 3.3: GDP measured as value added, and national income
• Extension 3.11: An investment coordination game
• Extension 5.9: Why make central banks independent?
• Extension 5.12: More about investment and present value
• Extension 6.7: The central bank and monetary policy
• Extension 6.9: Decomposing the rates of return on assets
• Extension 6.11: Rates of return, risk, and bond prices
• Extension 7.3: The rate of change of competitiveness
• Extension 7.8: The UIP condition: Theory and data
• Extension 7.9: Implications of UIP for interest rates when the commitment to a fixed exchange rate is not fully credible

How economists learn from facts

• My diet starts tomorrow (3.10 Shocks to households and the limits to smoothing consumption)
• The Mafia and the multiplier (5.7 The size of the multiplier and the impact of fiscal policy)

Great Economists

• Michał Kalecki (2.3 Unemployment and inequality: WS–PS model and Lorenz curve)
• Bill Phillips (4.4 Inflation, unemployment, and conflicting claims on output)
• John Maynard Keynes (5.8 Government austerity policy and the paradox of thrift)

Videos

• Unit 2: In our ‘Economist in action’ video, John Van Reenen reports on the wide variation in productivity across firms in the economy, and how best practices in technology and management can be promoted.
• Unit 4: Watch this video of Isabella Weber, one of the authors of the research study, explain the causes and consequences of ‘sellers’ inflation’.
• Unit 8: Anat Admati: What’s wrong with banking (and what to do about it).
• Unit 8: The Crisis of Credit Visualized.
• Unit 8: Watch this video of Claudia Maria Buch, one of the authors of the Insight ‘Too big to fail: lessons from a decade of financial sector reforms’.

Exercises

• 1.3: Exercise 1.1: Employment, unemployment, and participation
• 1.4: Exercise 1.2: Rebasing indices
• 1.6: Exercise 1.3: Shifts in the wage-setting curve
• 1.7: Exercise 1.4: Shifts in the price-setting curve
• 2.2: Exercise 2.1: Inequalities among your classmates
• 2.2: Exercise E2.1: Building a Gini coefficient calculator
• 2.3: Exercise 2.2: An increase in the wage share
• 2.4: Exercise 2.3: Unemployment rates and labour market policies
• 2.5: Exercise 2.4: Trade union density and income inequality
• 2.6: Exercise 2.5: Labour unions in the gig economy
• 2.7: Exercise 2.6: Education and training financed by taxation
• 2.8: Exercise 2.7: Energy prices and the WS–PS model
• 2.9: Exercise 2.8: Automation and inequality
• 2.10: Exercise 2.9: The effects of Danish flexicurity
• 2.11: Exercise 2.10: Comparing labour market performance
• 2.11: Exercise 2.11: Unemployment, well-being, and social norms
• 3.1: Exercise 3.1: The OECD Better Life Index
• 3.4: Exercise 3.2: Cost-of-living comparisons
• 3.5: Exercise 3.3: Defining recessions
• 3.5: Exercise 3.4: How to use FRED
• 3.8: Exercise 3.5: The multiplier model
• 3.9: Exercise 3.6: Lifetime consumption plans
• 3.10: Exercise 3.7: Health insurance
• 3.10: Exercise 3.8: Changes in income, changes in consumption
• 3.12: Exercise 3.9: Consulting FRED
• 3.13: Exercise 3.10: COVID-19 savings behaviour and the multiplier model
• 4.2: Exercise 4.1: Measuring inflation
• 4.2: Exercise 4.2: The CPI and the GDP deflator
• 4.2: Exercise 4.3: Using the CPI to measure inflation
• 4.3: Exercise 4.4: Comparing values over time
• 4.5: Exercise 4.5: The bargaining gap in a recession
• 4.5: Exercise 4.6: Positive and negative shocks
• 4.6: Exercise 4.7: A negative aggregate demand shock with high unemployment
• 4.6: Exercise 4.8: Inflation, expected inflation, and the bargaining gap
• 4.8: Exercise 4.9: Modelling supply-side and demand-side shocks
• 4.8: Exercise 4.10: Wars, pandemics, and inflation
• 4.9: Exercise 4.11: An oil shock that did not produce rising inflation
• 4.10: Exercise 4.12: Tax-push inflation
• 5.1: Exercise 5.1: Correlation vs causation
• 5.2: Exercise 5.2: Fiscal policy and the categories of government spending
• 5.5: Exercise 5.3: Illustrating supply and demand shocks
• 5.6: Exercise 5.4: Contributions to change in real gross domestic product over the business cycle
• 5.7: Exercise 5.5: Stimulus without more debt
• 5.8: Exercise 5.6: Austerity in France: 2014
• 5.9: Exercise E5.1: Central bank mandates
• 5.11: Exercise 5.7: Introduction to the inflation tool: A supply shock
• 5.11: Exercise 5.8: The oil shock and the central bank’s policy choice
• 5.11: Exercise 5.9: Active policy scenarios to address inflation and unemployment
• 5.12: Exercise E5.2: The policy interest rate and investment decisions
• 5.13: Exercise 5.10: The disconnect between the policy rate and lending rates
• 5.14: Exercise 5.11: The ‘ifs’ and ‘buts’ of monetary policy and the exchange rate
• 5.15: Exercise 5.12: The UK’s policy responses (1950–2023)
• 6.1: Exercise 6.1: Calculating the time spent not working
• 6.2: Exercise 6.2: Bilateral loan contracts
• 6.4: Exercise 6.3: Calculating net worth and equity
• 6.4: Exercise 6.4: Calculating collective net worth
• 6.5: Exercise 6.5: Bank money and bank balance sheets
• 6.6: Exercise 6.6: What do we mean by money?
• 6.6: Exercise 6.7: The Irish bank strike
• 6.7: Exercise 6.8: Alternative forms of money?
• 6.9: Exercise E6.1: Approximating real returns
• 6.10: Exercise 6.9: Calculating return on equity
• 6.10: Exercise 6.10: Leverage and negative net worth
• 6.11: Exercise 6.11: Debt and equity by income quartile
• 6.11: Exercise E6.2: Government borrowing
• 6.11: Exercise E6.3: Risk and return
• 6.12: Exercise 6.12: The financial sector: What’s it all for?
• 6.12: Exercise 6.13: So how do you live if you don’t work?
• 7.1: Exercise 7.1: Inflation around the world
• 7.3: Exercise E7.1: The accuracy of approximations
• 7.4: Exercise 7.2: Calculating real exchange rates
• 7.6: Exercise 7.3: Exchange rate regimes
• 7.7: Exercise 7.4: Changing the exchange rate regime
• 7.10: Exercise 7.5: Explaining cross-country and historical variations in inflation
• 7.11: Exercise 7.6: Governance and inflation
• 8.3: Exercise 8.1: Virtuous and vicious circles
• 8.5: Exercise 8.2: Modelling a bust in the housing market
• 8.5: Exercise 8.3: Differences between equilibrium and stability
• 8.6: Exercise 8.4: A boom in the housing market
• 8.6: Exercise 8.5: The big ten asset price bubbles of the last 400 years
• 8.7: Exercise 8.6: The financial accelerator
• 8.9: Exercise 8.7: Banking regulations can help bring on financial crises
• 8.9: Exercise 8.8: Behaviour in the financial crisis
• 8.11: Exercise 8.9: Environmental tipping points
• 8.12: Exercise 8.10: Environmental tipping points
• 8.13: Exercise 8.11: Electric vehicle adoption around the world

Figures

Unit 1

• Figure 1.1 Unemployment and real wage growth in 15 high-income countries (2010–2019).
• Figure 1.2 A model of the economy.
• Figure 1.3 The aggregate labour market.
• Figure 1.4 Macroeconomic performance in the UK and US: employment, unemployment, and participation.
• Figure 1.5 Labour market statistics for Australia, Germany, Norway, and Spain (averages over 2000–2019).
• Figure 1.6 Nominal wage index for the US (2010–2022), using 2010 as the base year.
• Figure 1.7 Consumer price index for the US, using 2010 as the base year.
• Figure 1.8 Real wage index for the US, using 2010 as the base year.
• Figure 1.9 Indices for nominal wages, consumer prices, and real wages in the US (2010–2022), with 2010 as the base year.
• Figure 1.10 Indices for nominal wages, consumer prices, and real wages in the UK and Italy (2010–2022), with 2010 as the base year.
• Figure 1.11 Labour market concepts.
• Figure 1.12 Output per worker is shared between firms and employees.
• Figure 1.13 The wage-setting (WS) curve.
• Figure 1.14 The price-setting (PS) curve.
• Figure 1.15 The WS–PS model of the economy’s supply side.
• Figure 1.16 The mutual dependence between firm behaviour and the whole economy.
• Figure 1.17 Labour market matching: flows, workers, and jobs.
• Figure 1.18 The reservation wage facing the firm.
• Figure 1.19 The firm’s reservation wage and no-shirking wage.
• Figure 1.20 Deriving the wage-setting curve for the aggregate economy, the WS curve.
• Figure 1.21 A wage-setting curve estimated for the US economy (1979–2019).
• Figure 1.22 Determinants of the PS real wage.
• Figure 1.23 Equilibrium (structural), and involuntary and voluntary unemployment.
• Figure 1.24 The WS–PS model, case 1: employment above equilibrium.
• Figure 1.25 The WS–PS model, case 2: employment below equilibrium.

Unit 2

• Figure 2.1 Unemployment in Spain and Germany (1960–2022).
• Figure 2.2 A Lorenz curve for wealth ownership.
• Figure 2.3 The distribution of spoils: pirates and the British navy.
• Figure 2.4a The Lorenz curve and Gini coefficient for wealth ownership.
• Figure 2.4b Comparing Gini coefficients.
• Figure 2.5 Market income and disposable income.
• Figure 2.6 Distribution of market and disposable income in the Netherlands (2020).
• Figure E2.1 Calculating the Gini coefficient using the Lorenz curve diagram.
• Figure 2.7 The distribution of income at supply-side equilibrium.
• Figure 2.8 The effect of an increase in the extent of competition faced by firms: the price-setting curve shifts upwards and inequality falls.
• Figure 2.9 The effect of education and training on labour market outcomes and inequality.
• Figure 2.10 Short- and long-run effects of introducing an unemployment benefit.
• Figure 2.11 Unemployment benefit generosity and unemployment rates across the OECD (2001–2020).
• Figure 2.12 Combining the introduction of an unemployment benefit with a solidarity wage policy to raise productivity in the economy.
• Figure 2.13 Share of employees whose wages are covered by collective bargaining agreements (2017–2020).
• Figure 2.14 The bargained wage-setting curve when there is union wage setting.
• Figure 2.15 Collective wage bargaining coverage and unemployment across the OECD.
• Figure 2.16 The bargained wage-setting curve and equilibrium when there is a union voice effect.
• Figure 2.17 Earnings inequality shown by the Gini coefficient and the share of unionized workers in the US (1915–2018).
• Figure 2.18 The effect of labour market segmentation.
• Figure 2.19 The WS–PS model with taxation.
• Figure 2.20 The effect of a rise in tax rates on wages and employment.
• Figure 2.21 The estimated average markup for firms in the US (1955–2016).
• Figure 2.22 The share of economic profits in income in the US non-financial corporate sector (1946–2016).
• Figure 2.23 The Gini coefficient for market income in the US (1913–2019).
• Figure 2.24 Rising market power (the product market) and declining worker power (the labour market)—a new equilibrium.
• Figure 2.25 Rising market power (the product market) and declining worker power (the labour market) leads to higher inequality in the new equilibrium.
• Figure 2.26 The triangle of Danish flexicurity.
• Figure 2.27 Macroeconomic performance: Unemployment and wage growth (2010–2019).
• Figure 2.28 Indicators for key variables in the WS–PS model: Germany, Spain, and Denmark.
• Figure 2.29 Unemployment in Spain, Germany, and Denmark (1960–2022).

Unit 3

• Figure 3.1 Recession hardships in the United States: survey results for 2013–2014.
• Figure 3.2 The circular flow model: three ways to measure GDP.
• Figure 3.3 The circular flow (expenditure, output, and income) model.
• Figure 3.4 Measuring GDP using value added by each industry.
• Figure 3.5 Shares of GDP by main expenditure type (2010–2019 average).
• Figure E3.1 The output structure of the UK economy: sector contributions to GDP in 2022.
• Figure E3.2 The income structure of the UK economy (2021).
• Figure 3.6 Gross domestic product (1980–2022), in nominal and real terms, expressed as an index (2000 = 100).
• Figure 3.7 Evolution of GDP per capita relative to the US (US = 100); GDP per capita at purchasing power parity (2009–2023).
• Figure 3.8a Real GDP in the UK and Japan, using linear scales (top) and ratio scales (bottom).
• Figure 3.8b UK GDP growth and unemployment (1875–2022).
• Figure 3.9 Contributions to percentage change in real GDP in the US in 2009.
• Figure 3.10a Growth rates of consumption, investment, and GDP in the UK and US, per cent per annum (1956–2022).
• Figure 3.10b Growth rates of consumption, investment, and GDP in Mexico and South Africa, per cent per annum (1961–2022).
• Figure 3.11 The aggregate consumption function.
• Figure 3.12 The aggregate demand function.
• Figure 3.13 Goods market equilibrium: the 45-degree line.
• Figure 3.14 Goods market equilibrium: the multiplier diagram.
• Figure 3.15 The multiplier in action: an investment-led recession.
• Figure 3.16 Changes in the AD curve.
• Figure 3.17 Consumption smoothing through our lifetime.
• Figure 3.18 An anticipated rise in income: consumption smoothing and credit constraints.
• Figure 3.19 Consumption when households demonstrate present bias: an anticipated fall in income.
• Figure 3.20 Investment in new technologies and the dot-com bubble (1991–2022).
• Figure 3.21 Low expected demand for the firm’s products creates a vicious circle.
• Figure 3.22 High expected demand for the firm’s products creates a virtuous circle.
• Figure E3.3 Investment decisions as a coordination game.
• Figure 3.23 Investment, aggregate demand, and business confidence in the eurozone (1996–2022).
• Figure 3.24 Aggregate investment function: effects of the interest rate and profit expectations.
• Figure 3.25 Contributions to the change in US GDP, COVID-19 episode.

Unit 4

• Figure 4.1 UK inflation rate (1875–2022).
• Figure 4.2 Number of online searches for the terms ‘inflation’ (blue), ‘cost of living’ (red), and ‘unemployment’ (green) in the UK, 2004–2023.
• Figure 4.3 Inflation levels and volatility in high- and low-income economies.
• Figure 4.4a Calculating the CPI: a basket of goods.
• Figure 4.4b Calculating the CPI using the basket prices.
• Figure 4.5 Supply-side equilibrium: claims on output per worker by workers and owners are compatible.
• Figure 4.6 Causal chain from lower unemployment to higher inflation.
• Figure 4.7 Adding output to the causal chain from higher aggregate demand to lower unemployment and higher inflation.
• Figure 4.8 Phillips’s original data and curve: wage inflation and unemployment (1861–1913).
• Figure 4.9 Bargaining gaps, inflation, and the Phillips curve.
• Figure 4.10 Deriving the Phillips curve from the causal chain from higher aggregate demand to lower unemployment and higher inflation.
• Figure 4.11 Bargaining gaps, expected inflation, and the Phillips curve.
• Figure 4.12 Causal chain with expected inflation.
• Figure 4.13 Unstable Phillips curves: expected inflation and the bargaining gap.
• Figure 4.14 Causal chain from last year’s inflation to this year’s inflation.
• Figure 4.15 Inflation expectations and Phillips curves.
• Figure 4.16 Inflation, expected inflation, and the bargaining gap.
• Figure 4.17 The supply side and the demand side of the aggregate economy.
• Figure 4.18 The business cycle: aggregate demand, employment, and inflation.
• Figure 4.19 Falling inflation in a recession.
• Figure 4.20a A negative supply-side shock (higher markup) opens up a bargaining gap at the initial equilibrium employment level.
• Figure 4.20b A negative supply-side shock (higher markup) and unchanged aggregate demand.
• Figure 4.20c Consequences for inflation of a negative supply-side shock (a higher markup shifts the PS curve down and the Phillips curve up).
• Figure 4.21 Consequences for inflation of a supply-side shock that shifts the WS curve up.
• Figure 4.22 UK GDP growth and real oil prices (1950–2022).
• Figure 4.23 UK inflation, equilibrium unemployment rate (‘NAIRU’), and real oil prices (1971–2022).
• Figure 4.24 An oil shock and inflation: the PS curve and Phillips curves.
• Figure 4.25 Price responses to rising employment and capacity utilization.
• Figure 4.26 Profit-push inflation due to capacity constraints.
• Figure 4.27 Indexes of nominal and real earnings and of consumer prices, UK (2020–2024).
• Figure 4.28 Gains and losses in the terms of trade in 2022: net energy exporters like Norway experienced terms-of-trade gains.
• Figure 4.29 Comparison of real wages with the terms-of-trade loss to the UK as a proportion of earnings (top panel); UK taxes as a percentage of the national wage bill (bottom-left panel); share of profits in GDP, where profits are measured by the ‘gross operating surplus’ of private businesses (bottom-right panel).

Unit 5

• Figure 5.1 Inflation and presidential election victory in the US (1912–2020).
• Figure 5.2 Fluctuations in output and the size of government (as measured by government tax revenue as a percent of national income) in the US (1870–2022).
• Figure 5.3 A fall in investment and AD: the need for stabilization.
• Figure 5.4 A fall in investment: stabilization via monetary policy.
• Figure 5.5 A fall in investment and AD: stabilization via fiscal policy.
• Figure 5.6 Inflation-stabilizing (equilibrium) unemployment rate, unemployment rate, and inflation rate in Canada (1985–2022).
• Figure 5.7 A negative supply shock and the policy dilemma.
• Figure 5.8 A negative supply shock: addressing the policy dilemma by tightening monetary policy.
• Figure 5.9 Using Mafia infiltration to estimate the multiplier.
• Figure 5.10 Using US stimulus highway spending to estimate the multiplier.
• Figure 5.11 The paradox of thrift: government austerity can worsen a recession.
• Figure 5.12 UK unemployment rate (falling from left to right) and inflation rate—selected years (1950–2022).
• Figure E5.1 Inflation and central bank independence: OECD countries.
• Figure E5.2 Inflation vs target inflation in 38 countries.
• Figure 5.13 An inflationary supply shock.
• Figure 5.14 The cost of getting inflation back to target; anchored expectations reduce the cost.
• Figure 5.15 Opening page of CORE Econ’s inflation tool.
• Figure 5.16a An oil shock hits the economy.
• Figure 5.16b Choose the central bank’s interest rate response and observe the economic outcomes.
• Figure 5.17 Example of the choice of policy by the central bank to respond to the increase in inflation.
• Figure E5.3 Firm A’s investment decision.
• Figure E5.4 Investment, expected rate of profit, and the impact of changes in the interest rate in an economy with two firms.
• Figure E5.5 The aggregate economy, where the expected rate of profit rises for a given set of projects (supply effect).
• Figure 5.18 Policy interest rate and monetary policy transmission mechanisms.
• Figure 5.19 The nominal policy rate and market interest rates in the United States.
• Figure 5.20 The transmission of monetary policy from the policy rate to inflation.
• Figure 5.21 A depreciation of the home economy’s real exchange rate raises output and employment.
• Figure 5.22 The exchange rate effects of a cut in Australia’s interest rate.
• Figure 5.23 Inflation and unemployment in the UK (1950–2023).
• Figure 5.24 The GBP/USD exchange rate (normalized to equal 1 in 1953).
• Figure 5.25 Real oil prices spiked in the 1970s.
• Figure 5.26 1967–1980: Real interest rates (the difference between the Bank of England policy rate and the consumer price index) were mostly negative.
• Figure 5.27 1967–1980: Unemployment fell below the NAIRU.
• Figure 5.28 1977–1984: Real interest rates (the difference between the Bank of England policy rate and the consumer price index) were positive for a sustained period.
• Figure 5.29 1977–1980: The real exchange rate appreciated significantly.
• Figure 5.30 1980–1984: A significant increase in unemployment above the NAIRU.
• Figure 5.31 1991–2019: Real interest rates (the difference between the Bank of England policy rate and the consumer price index) changed from positive to negative due to the global financial crisis.
• Figure 5.32 2007–2008: A sharp depreciation in the exchange rate.
• Figure 5.33 2021–2023: Gas prices increase due to the Russia–Ukraine war.
• Figure 5.34 2020–2023: Real interest rates (the difference between the Bank of England policy rate and the consumer price index) fell.
• Figure 5.35 2022: Inflation expectations did not significantly shift upwards.

Unit 6

• Figure 6.1 Calculating the fraction of life not working.
• Figure 6.2 A balance sheet.
• Figure 6.3 Marco and Julia’s balance sheets (units of grain).
• Figure 6.4 A bilateral loan contract: what happens to Marco’s 100 units of grain.
• Figure 6.5 Total liabilities and wealth: multiples of GDP.
• Figure 6.6 The relationship between participation in the financial sector and GDP per capita, showing lines of best fit.
• Figure 6.7 The balance sheet of the bank as an intermediary between Julia and Marco.
• Figure 6.8 Julia, Marco, and the bank’s balance sheet.
• Figure 6.9 Saving and lending at the bank: what happens to Marco’s 100 units of grain.
• Figure 6.10 Bank of England consolidated balance sheet in GBP (millions), 2021.
• Figure 6.11 Bank of England liabilities, % of GDP (1946–2023).
• Figure E6.1a Determining the policy rate when reserves are scarce.
• Figure E6.1b An ample reserves regime.
• Figure 6.12a Money creation by lending, if both Company A and B bank at the same bank.
• Figure 6.12b Money creation by lending, if Company B has an account with a different bank.
• Figure 6.13 The financial sector and the wider economy.
• Figure 6.14a How leverage increases the rate of return on equity.
• Figure 6.14b How leverage results in losses when the return on investment is lower than expected.
• Figure 6.15 Comparing the leverage of a bank with a non-financial company: Barclays and Honda.
• Figure 6.16 Comparing assets and liabilities of US households, according to household net worth.
• Figure 6.17a Rate of return on currency in the US (1900–2020).
• Figure 6.17b Real rates of return on three other assets, United States.
• Figure 6.18 Global real rates of return: bonds, equities, and housing in 16 countries (1950–2015).
• Figure E6.2 The UK policy rate and implied interest rates (‘yields’) on short-term government bonds (maturing in 1 to 6 months).
• Figure 6.19a A summary of the financial sector, with both markets and financial intermediaries.
• Figure 6.19b The financial sector disappears: all wealth is ultimately owned by households and the government.
• Figure 6.20 The financial sector: what’s it all for?

Unit 7

• Figure 7.1 Argentina’s CPI inflation rate (1960–2023).
• Figure 7.2 Inflation around the world in 2022.
• Figure 7.3 CPI inflation in Germany, the UK, and Spain.
• Figure 7.4 Daily exchange rates for Japan as the home country and Denmark as the home country: Japanese yen per US dollar and Danish kroner per euro.
• Figure 7.5 The impact of a positive demand shock on a country with a flexible exchange rate and an inflation target.
• Figure 7.6 The impacts of depreciation and appreciation in a FlexIT economy.
• Figure 7.7 The impact of a positive demand shock on a country with a flexible exchange rate regime and no inflation target, FlexNIT.
• Figure 7.8 Positive demand shock in a FlexNIT economy: an inflation–depreciation spiral.
• Figure 7.9 The effects of loose monetary policy in a FlexNIT economy.
• Figure 7.10 Spanish vs German inflation during the period of flexible exchange rates.
• Figure 7.11 The impact of a positive aggregate demand shock for a country in a common currency area.
• Figure 7.12 Spain vs Germany post-1999: impact of eurozone membership on the Spanish economy.
• Figure 7.13 Three monetary policy and exchange rate regimes.
• Figure 7.14 CPI inflation rates in Senegal and France (1999–2022).
• Figure 7.15 Exchange rate regimes and national monetary policy autonomy across the world.
• Figure 7.16 The correlation between exchange rate depreciation and inflation (2010–2019).
• Figure 7.17 Inflation and the nominal exchange rate in Argentina (1991–2001).
• Figure 7.18 Central bank policy rates in 2022.
• Figure E7.1 Comparing interest differentials and subsequent rates of depreciation.
• Figure 7.19 An exchange rate regime is a monetary policy regime.
• Figure 7.20 Exchange rates and interest rates in Spain, Germany, and Denmark (1960–2023).
• Figure 7.21 Monetary finance and inflation in Argentina (1960–2017).
• Figure 7.22 Exchange rate and monetary regimes: summarizing the key themes of this unit.
• Figure 7.23 Quality of governance and average inflation (2012–2022).

Unit 8

• Figure 8.1 US real GDP per capita (2000–2023), ratio scale.
• Figure 8.2 An unstable equilibrium.
• Figure 8.3 Positive feedbacks destabilize an unstable equilibrium and negative feedbacks stabilize a stable equilibrium.
• Figure 8.4 A poverty trap: lock-in due to risk aversion.
• Figure 8.5 Lock-in: the case of a poverty trap.
• Figure 8.6 The poverty trap dynamics curve (PTDC).
• Figure 8.7 Distribution of income in the treatment group.
• Figure 8.8 The ratio of house prices to median income in the US (1945–2024).
• Figure 8.9 Deriving a price dynamics curve.
• Figure 8.10 Positive and negative feedback in the housing market.
• Figure 8.11 The price shock is dampened: negative feedback and stable equilibrium.
• Figure 8.12 The price shock is amplified: positive feedback and instability.
• Figure 8.13 Unstable and stable equilibria in the housing market.
• Figure 8.14 Price dynamics, multiple equilibria, and the S-shaped PDC.
• Figure 8.15 A shift in the S-shaped PDC.
• Figure 8.16 A shift in the PDC eliminates the tipping point from three equilibria to one.
• Figure 8.17 The financial accelerator: housing collateral amplifies house price increases and decreases, contributing to positive feedback process when prices either rise or fall.
• Figure 8.18 The household debt-to-income ratio and house prices in the US (1950–2022).
• Figure 8.19 Household wealth and debt in the US: poorest and richest quintile groups by net worth in 2007.
• Figure 8.20 The growth of income (upper panel) and wealth (lower panel) for three wealth groups: the poorest 50%, the middle to upper 40% (50–90%), and the richest 10%; for each group, 1971 = 100.
• Figure 8.21 Leverage of US and UK banks (1980–2023).
• Figure 8.22 Positive feedback processes that amplify a fall in house prices.
• Figure 8.23 Bank–government interaction can produce excessive risk-taking by banks.
• Figure 8.24 The external effect of the implicit funding subsidy to banks.
• Figure 8.25 Decline of Arctic summer sea ice.
• Figure 8.26 Positive feedback processes accelerating climate change.
• Figure 8.27 Environmental dynamics, multiple equilibria, and the S-shaped EDC.
• Figure 8.28 Negative feedback processes stabilize a ‘good equilibrium’ on the left, and a ‘bad equilibrium’ on the right.
• Figure 8.29 Stabilization of sea ice following a shock from G to E0.
• Figure 8.30 Climate change causes the EDC to shift down.
• Figure 8.31 Break-even point: costs of operating e-vehicles and c-vehicles.
• Figure 8.32 The adoption dynamics curve with an e-vehicle equilibrium (G) and the status quo carbon-based equilibrium (B).
• Figure 8.33 An upward shift in the ADC.