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Abnormal Profit See Supernormal Profit Absolute Advantage 171-4, 177, 178 Accelerator Theory 124, 126, 128 Accepting Houses 140

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Abnormal Profit See Supernormal Profit Absolute Advantage 171-4, 177, 178 Accelerator Theory 124, 126, 128 Accepting Houses 140 235 INDEX A Barriers to trade see Protection Barter 132 Abnormal profit see Supernormal profit Bill of exchange 53, 140, 143 Absolute advantage 171-4, 177, 178 Birth rate 80, 82, 83, 229 Accelerator theory 124, 126, 128 Black economy see Underground Economy Accepting houses 140, 143 Black market 28, 31, 32 Acquisitions 42, 63 Bonds 140, 149, 150, 153 Adaptive expectations 169, 170 Budget 121, 135, 145, 212, 213, 217, 219, 220 Advertising 42, 58, 65, 73, 78, 89 Budget line 34, 35 Aggregate demand 117, Ch.22, 161-3, 182, 197, Buffer stock 29 209, 219-25, 227 Bulk-buying 41, 46, 71 Aggregate supply Ch. 22, 161, 223-5 Aid, bilateral and multilateral 104, 232, 233 Allocative efficiency 182-4, 197, 204, 206, 208, 209, c 211, 212, 223, 229, 230 Capital 1, 43, 45, 46, 79, 86, 90, 91, 96, 97, 100, 108, Appreciation of currency 194-6, 198 123, 124, 127, 131, 133, 135, 136, 203, 206, 207, Arbitrage 146, 147 220, 231-4 Asset demand for money 149, 150 Capital depreciation see Depreciation of capital Asset stripping 42 Cartels 60, 76, 78, 230-2 Assisted areas 53, 212 Cecchini Report 107 Average cost 40, 43, 47-52, 57, 65, 66, 73, 74, 78 Central bank see Bank of England Average product 39, 40, 45, 46, 51, 52 Centrally planned economies 3--5 Average propensity to save 115, 227 Certificates of deposit 140, 143, 144 Average revenue 48, 49, 51, 65, 68, 73--6 Cheques 139, 144, 147 Average revenue product 93 Choice (and scarcity) 1-3 Circular flow of income 221 Clearing banks 14 B Collusion 76, 78 Common Agricultural Policy (CAP) 29, 181, 203--5, Balance of payments 1, 30, 64, 70, 161, 163, 180, 207-9, 211 182, Ch. 32, 199, 200, 207, 209, 227 Comparative advantage (cost) 172-4, 177, 181, 189, and capital flows 200 204, 208, 211, 220, 229 exchange rates 196, 197 Consumer equilibrium 33--6 Balance of trade 121, 122, 186, 187, 190, 191 Consumer sovereignty 6 Balanced budget multiplier 118, 121, 122 Consumer surplus 67, 69 Balancing item 186, 190 Consumption function 111-15 Ballots 28 Contestable markets 227 Bank deposit multiplier see Money supply Corporation Tax 214, 224, 226 multiplier Cost-benefit analysis 126 Bank deposits 137-9, 144-7 Cost curves Bank of England 140-7, 154, 186, 213 long run 51 Barriers to entry 60, 76, 94, 227 short run 51 236 INDEX Cost-plus pricing 167, 168 'Economic miracle', UK 371-2 Costs of production 22, 39, 41, 43, 44, Ch. 8, 57, 132, Economic and monetary union (EMU) 206, 207, 210 134, 225 Economic rent 97, 98, 231 average 40, 43, 47-52, 65, 66, 73, 74, 78 Economies of scale 40-6, 48, 59, 61, 64, 66, 76, 100, fixed 47, 49-52 183, 203, 210 marginal 47, 49-52, 55--9, 63, 65, 67, 68, 92, 98 Elasticity of demand 12-16, 18, 26, 28, 34, 37, 51, variable 47, 49, 50-2, 65 52, 55, 63,65,67,69, 71, 72, 74, 75, 98,99, 150, Cost-push inflation 160, 161 153, 154, 193, 196, 199, 200, 208, 230, 232 Council tax 157 Elasticity of supply 12, 96, 97, 99, 131, 133, 161, 196 Cross-elasticity of demand 13, 14 Emigration 80, 82, 83, 232, 233 Current account 186, 187, 191, 192, 195, 200, 219, Engel Curve 35, 37, 38 220, 223, 227, 233 Entrepreneur 55, Ch. 15, 180, 183, 189, 220, 230 Equation of exchange 160 Equilibrium level of income 112, 113, 115--19, 161 D Equilibrium price 11-13, 20, 22, 27-32, 61, 74, 203, Death rate 80, 82, 83, 229 204, 207, 209, 217 Debentures 53, 54 Equity see Ordinary shares Debt crisis 230, 232, 233 European Community 29, 31, 67, 70, 71, 104, 107, Deflationary policy (i.e. reducing aggregate 108, 181, Ch. 34 demand) 219, 220 Eurocurrencies 142, 143 Demand 5, 10, 18-20, 22-32, Ch. 6, 55--8, 66, 74, European Currency Unit (ECU) 205, 211 194-6, 201, 202, 207, 217, 218, 231 European Monetary System (EMS) 188, 198, 205, aggregate 117, Ch.22, 197, 209, 219-24, 227 207, 209-11 for capital 125 European Monetary Union (EMU) 156, 206, 207, elasticity of 12-16, 18, 25, 28 210, 211 for labour 93-6,98,99,102 Exchange controls 179 for money 149-54 Exchange Equalisation Account 142 law of 10, 14 Exchange Rate Mechanism (ERM) 188, 205, 206, Demand management Ch. 36 211 Demand-pull inflation 160-2, 167, 168 Exchange rates 1, 142, 175, 181, Ch.33, 207, 210, Dependency ratio 228 221, 222 Depreciation Expectations of capital 52, 104, 107, 109, 126 adaptive 169, 170 of currencies 194-8, 201, 209 rational Ch. 29 Deregulation 60, 78, 107, 108, 168, 224, 227, 230 Expectations-augmented Phillips Curve 163, 164 Devaluation 188, 197-201 Exports 1, 28, 30, 64, 68-70, 72, 107-10, 117, 121, Developing countries 104, 106, Ch. 38 122, 130, 132, 135, 136, 161, 173-8, 182, 185--93, Diminishing marginal utility 33, 37 195, 197-200, 205, 206, 208, 213, 221, 222, 225, Diminishing returns 39, 42, 45--7, 49, 92, 93, 98 227, 229, 239 Direct cost see Variable cost External economies 42, 43 Direct taxes 114, 214, 222, 226 Externalities 20-3, 26, 106, 108 Discount houses (market) 141-3, 145, 146 Discounting to present value (DPV) 123-5, 129 F Discriminating monopoly Ch. 12 Diseconomies of scale 40-2, 45 Factors of production Distribution of income and wealth 20, 106, 107 fixed 39, 45, 49, 59 Division of labour 39, 40, 43, 79, 83, 84 variable 39, 45, 49 Financial economies 41 E Fiscal policy 146, 147, 168, 220 Fixed costs 47, 49-52, 231 Economic development Ch. 38 Fixed exchange rates 193, 195--9, 201, 209 Economic efficiency see Allocative efficiency Floating exchange rates 193-5, 197, 198, 201 Economic growth 79, 219, 220, 221, 223, 227, 229, Foreign debt, and developing countries 230, 232, 230, 232, 233 233 INDEX 237 Free enterprise economies 3--6, 31 demand-pull 160-1, 167 Free goods 5 core 157 Free trade (and protection) Ch. 31 cost-push 160, 161, 167 Friedman, Professor M. 198 headline 157 Full employment 2 Injections and leakages 112-14, 11!}--21, 220, 222 Integration 42, 45, 46 G Inter-bank market 143 Interest rates 6, 25, 114, 125-8, 140, 142, 143-1, Gearing ratio 54 Ch.26, 185, 192, 195, 196, 222, 224, 225, 230, General Agreement on Tariffs and Trade 233 (GATT) 180, 204, 205, 208 and exchange rate 195, 196, 19!}--201 Geographical mobility 31, 79, 80, 90, 100 International Bank for Reconstruction and Giffen goods 33, 37, 38 Development (World Bank) 177 Gilt-edged securities 145-7 International trade Ch. 31, 197, 199, 208 Government expenditure 107, 109, 117, 118, 121, Intra-industry specialisation 286 122 Investment 62, 64, 84, 85, 100, 107, 108, 111-13, Gross Domestic Product 104, 105, 107, 109, 191, 115, 119, 121, 123, 127, 148, 152, 181, 185, 186, 192, 233, 234 186, 189, 191, 192, 197, 208, 216, 220, 221, 225, Gross National Product 104, 107, 109, 124, 125, 128, 228--33 190, 192, 232, 233 accelerator, theory of 124, 126, 128 Growth see Economic growth and rate of interest 125 and saving 112, 113, 228--30, 233 H Invisible trade 186, 189, 191, 192 High-powered money 146, 147 Hyperinflation 160 K Keynes,]. M. 111 Keynesian theory of income determination Chs 19, 20, 221 Imperfect competition Ch. 13, 93 Keynesian theory of interest 14!}--52 Import quotas 173, 179 Kinked demand curve 74-7 Import restrictions see Protection Imports 1,30, 64,67, 70,104,107,109,110,117-22, 130, 132, 135, 161, 173-7, 179, 181-3, 185-92, L 195, 196, 198, 200, 201, 206, 210, 211, 213, 221, 225, 229 Labour 1,2, 5,21,39,45,46, 49, Ch.14, 92, 93,98- Income determination Chs 19, 20, 22 100, 108, 161, 170, 177, 203, 207, 220, 223, 231, Income effect 33-7, 38 232, 234 Income elasticity of demand 12-15, 34, 36, 37, 199, market reform, in UK 224 208, 230-2 mobility of 30, 31, 79, 80, 85, 167, 214, 220, 224, Income tax 120, 121, 135, 136, 168, 214-16, 223, 224 226 Increased dimensions 41 supply of 79, 80, 93--6, 98, 99, 102 Increasing returns 39, 42, 45, 47, 92 Land 1, 4, 22, 90, 91, 101 Index numbers 105, 109, Ch. 27 Leakages and injections 222 Index of Retail Prices (RPI) see Retail Price Index Least-cost combination 48 Indifference curves 33--6 Less developed countries see Developing countries Indirect costs see Fixed costs Liquidity 143, 144, 152 Indirect taxes 114, 214, 222 Liquidity preference theory 14!}--52 Indivisibilities 40 Liquidity trap 151 Infant industry 180, 182 Loanable funds theory 148, 149, 153, 154 Inferior goods 14, 33-8 Local authority bills 140 Inflation 1, 8, 22, 30, 105, 135, 137, 153, 154, 156--8, Local taxation see Council tax Ch.28, 169, 170, 180, 182, 188, 191, 192, 195- London Discount Market Association (LDMA) see 202, 205-7, 209, 217, 219, 222-4, 227, 233 Discount House 238 INDEX Long run 39, 45, 47, 48, 51, 55-7, 59, 60, 74, 76, 90, N 91, 98, 130-5, 160, 163, 166, 167, 180, 182, 183, 189, 196, 197, 199-201, 222-7 National Debt 141, 146, 212-14, 217, 218 Lorenz Curve 101 National Income 100, 126, 127, 213, 216, 222 determination of Chs 19, 20, 22 measurement of Ch.
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