Economics for Business Upplaga 3

Preface to the third edition Acknowledgements 1 The economic policy consensus 1 Introduction 1.1 The economic policy consensus 2 1.2 Why policy changed 1.3 Implications for the future 1.4 Criticisms of the new consensus 1.5 Will the consensus last? Summary Questions for discussion Exercises Further reading 2 What makes nations grow? Introduction 2.1 Trends in economic growth 2.2 Growth theories 2.3 Human welfare and sustainable growth 2.4 Policy prescriptions for growth 2.5 Conclusions Summary Questions for discussion Exercises Further reading Appendix 2.1: The economics of the new economy Part I The market system and competition 3 The market system in action Introduction 3.1 The market system 3.2 The role of prices 3.3 Movements in demand and supply 3.4 The role of traders and arbitrage 3.5 The efficiency of the market system 3.6 The free market system in social context 3.7 Conclusions Summary Questions for discussion Exercises Further reading 4 Market demand and the pricing decision Introduction 4.1 What is a ‘rational’ consumer? 4.2 Deriving the market demand curve 4.3 Elasticities of demand 4.4 Estimating the demand function 4.5 Price elasticities and the pricing decision 4.6 Conclusions Summary Questions for discussion Exercises Further reading 5 The firm in a competitive market Introduction 5.1 Profit maximisation 5.2 Rules for maximising profit 5.3 Cost structure of the firm 5.4 The transaction costs approach 5.5 From cost structure to supply curve 5.6 Conclusions Summary Questions for discussion Exercises Further reading 6 The economics of market power Introduction 6.1 Firm size 6.2 The economics of market power 6.3 How to sustain monopoly power 6.4 Market power with few firms – the case of oligopoly 6.5 Conclusions Summary Questions for discussion Exercises Further reading Case study 6.1: The diamond cartel 7 Competition policy, privatisation and regulation Introduction 7.1 The case for competition 7.2 Competition policy 7.3 Privatisation 7.4 Regulation 7.5 Conclusions Summary Questions for discussion Exercises Further reading 8 Government intervention and the market system Introduction 8.1 Income distribution and the equity–efficiency trade-off 8.2 Market failures 8.3 Government intervention 8.4 Government failure 8.5 Conclusions Summary Questions for discussion Exercises Further reading 9 Business and the environment Introduction 9.1 Economic growth and the environment 9.2 Environmental policies 9.3 Policy instruments: design and effect 9.4 Impact on business 9.5 Conclusions Summary Questions for discussion Exercises Further reading 10 Hiring labour and the investment decision Introduction 10.1 The hiring decision 10.2 The investment decision 10.3 Conclusions Summary Questions for discussion Exercises Further reading Part II The macroeconomic framework 11 Aggregate supply, aggregate demand and the price level Introduction 11.1 How is gross domestic product (GDP) calculated? 11.2 Potential GDP, actual GDP, and GDP at purchasing power parity (PPP) 11.3 The aggregate supply (AS) curve 11.4 Aggregate demand (AD) and money 11.5 Conclusions Summary Questions for discussion Exercises Further reading Appendix 11.1: The money supply process 12 Price stability and central banks Introduction 12.1 What is price stability? 12.2 Deviation from price stability 1: inflation 12.3 Deviation from price stability 2: deflation 12.4 Benefits of price stability 12.5 Central banks and institutional reform 12.6 Price stability and exchange rate anchors 12.7 Is inflation dead? 12.8 Conclusions Summary Questions for discussion Exercises Further reading 13 Understanding interest rates and monetary policy Introduction 13.1 Which interest rate? 13.2 What determines interest rates? 13.3 Interest rates and economic activity 13.4 Monetary policy and interest rates 13.5 The design of monetary policy 13.6 Conclusions Summary Questions for discussion Exercises Further reading Case study 13.1: Taylor’s rule for monetary policy 14 Unemployment and the labour market Introduction 14.1 Facts about unemployment 14.2 Supply-side approach and the market mechanism 14.3 Short-run versus long-run perspectives 14.4 The importance of demand 14.5 Technology, productivity and unemployment 14.6 Labour market policies 14.7 Conclusions Summary Questions for discussion Exercises Further reading Appendix 14.1: Unemployment and inflation – the Phillips curve 15 Fiscal policy, budget deficits and government debt Introduction 15.1 Counter-cyclical fiscal policy 15.2 The limits of fiscal activism 15.3 Public debt and ‘crowding out’ 15.4 Fiscal policy in Europe 15.5 Conclusions Summary Questions for discussion Exercises Further reading Appendix 15.1: The sustainability of debt 16 Business fluctuations and forecasting Introduction 16.1 Business fluctuations – the facts 16.2 What causes fluctuations? 16.3 Business fluctuations and growth 16.4 Forecasting the business cycle 16.5 Macro-forecasts and the firm 16.6 Conclusions Summary Questions for discussion Exercises Further reading Part III The global economy Introduction to Part III 17 Foreign trade: patterns and policy Introduction 17.1 Trends in global trade 17.2 Explaining the gains from international trade 17.3 Quantifying the gains from trade 17.4 Trade policy and protection 17.5 What determines comparative advantage? 17.6 Conclusions Summary Questions for discussion Exercises Further reading Case study 17.1: China and the WTO: the effects of trade liberalisation 18 Capital flows and foreign investment Introduction 18.1 Capital flows 18.2 Basic model 18.3 Foreign direct investment and multinationals 18.4 Effects of foreign investment 18.5 Conclusions Summary Questions for discussion Exercises Further reading 19 Labour migration Introduction 19.1 Recent trends 19.2 Effects of migration – the basic model 19.3 Migration, public finances and jobs 19.4 Conclusions Summary Questions for discussion Exercises Further reading 20 The balance of payments: what it is and why it matters Introduction 20.1 What is the balance of payments? 20.2 Balance of payments problems 20.3 How to correct a balance of payments imbalance 20.4 Conclusions Summary Questions for discussion Exercises Further reading 21 Coping with exchange rates Introduction 21.1 How exchange rates work 21.2 Exchange rate theory 21.3 Capital flows and exchange rate volatility 21.4 Strategies for coping with exchange rate risk 21.5 Conclusions Summary Questions for discussion Exercises Further reading Appendix 21.1: The global foreign exchange market 22 Exchange rate regimes and the euro Introduction 22.1 The global exchange rate system 22.2 Float 22.4 Establishing a single currency – the euro 22.5 Conclusions Summary Questions for discussion xercises Further reading Appendix 22.1: Exchange rate regimes – a brief history Index