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All your complicated economic questions and theories explained by world experts.

Economics is a broad topic and if you're not an economist by profession, your knowledge might be limited - until now! The Economics Book is your jargon-free, visual guide to understanding the production and distribution of wealth.

Using a combination of authoritative, clear text, and bold graphics, this encyclopedia explores and explains big questions and issues that affect us all - everything from taxation, to recession, to the housing market and much more! By following an innovative visual approach, The Economics Bookdemystifies and untangles complicated theories. Make sense of abstract concepts through colourful graphics, fun facts, and step-by-step flow diagrams.

Satisfy Your Hunger for Knowledge

Dive deeper into the history of economics with this page-turning book! From the ancient Greeks to today, you'll discover over 100 key ideas from the world's greatest theorists, such as Thomas Malthus, John Maynard Keynes, and Milton Friedman. Fortunately, you don't need a degree in economics to gain this type of understanding. The Economics Book is your accessible guide to gaining tonnes of invaluable economic knowledge and learning how the economy shapes our world!

This book will be your guide through the history of economics:
- Let the Trading Begin 400 BCE - 1770 CE
- The Age of Reason 1770 - 1820
- Industrial and Economic Revolutions 1820 - 1929
- War and Depressions: 1929 - 1945
- Post-War Economics 1945 - 1970
- Contemporary Economics 1970 - Present

The Series Simply Explained
With over 7 million copies sold worldwide to date, The Economics Book is part of the award-winning Big Ideas series from DK Books. It uses innovative graphics along with engaging writing to make complex subjects easier to understand.

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All your complicated economic questions and theories explained by world experts.Economics is a broad topic and if you're not an economist by profession, your knowledge might be limited - until now!

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As of March 2021, the gross domestic product (GDP) of the United Kingdom is expected to grow by four percent in 2021, and by a further 7.3 percent in 2022. The sudden emergence of COVID-19 in 2020 and subsequent closure of large parts of the economy is the cause of the sharp contraction in 2020.

No-deal Brexit and GDP

In the event of a no-deal Brexit, where the United Kingdom leaves the European Union without any sort of agreement then the Gross Domestic Product of the UK could decline by as much as eight percent. In this scenario, the Bank of England has also predicted that the unemployment rate could peak at 7.5 percent, and that house prices could decline by as much as 30 percent.

Recent GDP Growth shows positive signs

Although Brexit has led the United Kingdom into a political crisis, the economy appears to be weathering the storm relatively well.  The most recent data for 2020 has that the pace of economic growth is accelerating. While the employment rate for the third quarter of 2020 is higher than the previous year.

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As of March 2021, the gross domestic product (GDP) of the United Kingdom is expected to grow by four percent in 2021, and by a further 7.3 percent in 2022. The sudden emergence of COVID-19 in 2020 and subsequent closure of large parts of the economy is the cause of the sharp contraction in 2020.

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High freight rates cast a shadow over economic recovery | UNCTAD

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The recovery of the global economy is threatened by high freight rates, which are likely to continue in the coming months, according to UNCTAD’s Review of Maritime Transport 2021 published on 18 November. UNCTAD’s analysis shows that the current surge in container freight rates, if sustained, could…

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Natural disasters, financial misconduct, politics, and several other factors play an important part in how an economy reacts. When an event occurs on a large enough scale, there can be tremendous impacts on economies throughout the world.

Each century has its own unique economic challenges. The first two decades of the 21st century have been no different in that respect-here are the most economically impactful events that have occurred so far.

2020: COVID-19 Pandemic and 2020 Recession

The stock market crash of 2020 began on Monday, March 9, followed by the largest point plunge for the Dow Jones Industrial Average (DJIA) to that date. Two more record-setting point drops followed it on March 12 and March 16.﻿﻿

The crash was fueled by global investor fears about the coronavirus spread, which was anticipated to cause oil price drops and a recession.

On March 11, 2020, the World Health Organization declared the novel coronavirus a pandemic.﻿﻿

As a result, most governments closed non-essential services. In just a few months, the pandemic devastated the U.S. economy. In the first quarter of 2020, growth declined by 5%. In April, retail sales plummeted 16.4% as governors forced the closure of non-essential businesses. The closure put many people out of work, lifting the the number of unemployed workers to 23 million.

The pandemic's total impact on the global economy will be under investigation for many years to come. Recent projections show that global poverty is on track to fall back to 2017 levels after more than 20 years of continuous reduction.

2016: Brexit Vote

In June of 2017, the British voted in a general election to exit the European Union. This action became known as "Brexit," the portmanteau for "Britiain's exit" from the European Union.

The UK officially left the EU on January 31, 2020. Economic growth dropped significantly in the first quarter, reaching a low not seen since 2003. At the time, the British government estimated that Brexit would lower economic growth by 6.7% over 15 years.

Over the next year, the British economy began to rebound-even with the coronavirus epidemic-nearly reaching pre-Brexit levels of output by the end of 2020.

2015: China Emerges as the World's Largest Economy

According to the International Monetary Fund (IMF), China became the world's largest economy based on purchasing power parity (PPP), which uses a conversion rate to compare currency power to a theoretical international currency.

China still has less gross domestic product (GDP) than the U.S., but it is leading in annual growth. PPP and GDP growth have shifted the economic balance of power, effectively pushing the U.S. down to second place.

China is also the second-largest holder of U.S. debt. That position gives it leverage when negotiating policies regarding imports and exports. For example, China's holdings of U.S. debt allow lower interest rates and cheaper consumer goods for the U.S.

If China were to call in its debt, U.S. interest rates and prices would rise, slowing America's economic growth-however, that would be a double-edged sword for China. Calling in debt would result in a loss of trade leverage and would cost it much of its export market. The U.S. imported $435 billion worth of goods from China in 2020.

2015: Greek Debt Crisis Threatens European Union

There were several factors behind the Greek debt crisis. One of the most influential factors was the amount of sovereign debt the country had taken on.

In 2015, Greece nearly defaulted on its debts. To avoid default, the European Union (EU) loaned Greece enough to continue making payments. It was the biggest financial rescue of a bankrupt country in history.

It also triggered the Eurozone debt crisis. Greece's debt crisis triggered concerns that other heavily indebted EU members would default as well. The crisis led to bailouts for other countries and caused many to question the viability of having one currency for the EU.

2014: Obamacare Adds Coverage for 20 Million

The Affordable Care Act (ACA) expanded healthcare coverage to over 20 million people. Lower-cost preventive care for chronic illnesses and other conditions allowed previously under-insured or uninsured people to receive care at reduced costs.

Expanding coverage reduced the country's overall tax burden, because federal, state and local governments could reduce healthcare spending further.

As a result, the rate at which healthcare costs rise has slowed. Between 2010 and 2016, they rose by 4.3% per year. However, projections still show that healthcare expenditures are expected to continue increasing.

2011: Japan's Tsunami and Nuclear Disaster

On March 11, 2011, Japan was hit by a 9.0 magnitude earthquake. It caused a 133-foot high tsunami to crash over the country's northeastern shoreline. Over 18,000 people died, and several thousand went missing. The earthquake and tsunami have been estimated to have caused $220 billion in damages.

The waves damaged the Fukushima nuclear power plant, creating radioactive leaks. The "Triple Disaster" devastated Japan's economy. It crippled the country's nuclear industry and convinced Europe to cut back its reliance on nuclear power.

2008: Billions in Bailouts

One of the worst in history, the financial crisis that took place between 2008 and 2009 was caused by poor decision-making and greed from financial, investment, and insurance institutions, mainly due to mortgage-backed securities created from subprime mortgages.

On Monday, September 15, 2008, the large investment bank Lehman Brothers, which was heavily invested in these securities, announced bankruptcy. On September 16, the American International Group (AIG), the world's largest insurance company, announced that it was going bankrupt.

Many investment funds owned AIG's stock and derivatives-this lead to an avalanche of stock value collapses, which took much of the market down.

On September 29, 2008, the Dow Jones Industrial Average (or "Dow") fell 777.68 points. Between October 9, 2007, and March 6, 2009, the Dow dropped 50%. On October 3, 2008, Congress passed a $700 billion bailout bill, now known as the "Troubled Assets Relief Program" (or "TARP").

On October 14, the Treasury used $350 billion for the Capital Repurchase Program, which purchased preferred stock in major banks.

The 2009 economic stimulus package sought to reassure investors and end the recession. It spent over $179 billion in tax relief, health services, and unemployment compensation, and helped to ease investor concerns and end the recession.

2007: Housing Crisis

Financial deregulation in 1999 led to the ability for banks to invest their customers' deposits in derivatives. The housing market expanded dangerously in the following years, with these derivatives (called " mortgage-backed securities") being created from mortgages that had been given to people who couldn't afford them.

Investors began making huge profits from the derivatives that mortgage-backed securities were based on. Average new home prices fell by 22 percent, from their peak of $262,600 in March 2007 to $204,200 in October 2010.

At the same time, the Federal Reserve raised interest rates. Many homeowners had adjustable-rate mortgages that followed the fed funds rate-when rates rose, so did monthly premiums.

Many homeowners lost equity in their homes, or couldn't sell them or meet the increased monthly payments. Mortgages defaulted, and the securities created from them dropped significantly in price-influencing the financial crisis.

2005: Hurricane Katrina Cost $160 Billion

The twenty-first century has seen its share of costly natural disasters. Hurricane Katrina was a Category 5 storm that hit the coast of Louisiana on August 29, 2005. It was the most destructive natural disaster in U.S. history, causing $160 billion in damage.﻿﻿

2001: 9/11 Attack Leads to War on Terror

The attacks on September 11, 2001, killed 2,973 people, including 343 firefighters. The physical damage was between $82.8 billion and $94.8 billion.

The attacks caused the stock exchange to close. When it reopened, the Dow dropped almost 700 points. The attacks deepened the 2001 recession caused by the bursting of the dot-com investing bubble. They also led to the implementation of the War on Terror. The costs of the wars in Afghanistan and Iraq have continued to increase. The latest studies reveal that costs have exceeded $6.4 trillion.

1. Yahoo Finance. " Dow Jones Industrial Average," Historical Data. Accessed April 2, 2021.

2. World Health Organization. " WHO Director-General's Opening Remarks at the Media Briefing on COVID-19 - 11 March 2020," Accessed April 2, 2021.

3. Bureau of Economic Analysis. " National Income and Product Accounts Tables: Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product," Accessed April 2, 2021.

4. U.S. Census Bureau. " Advance Monthly Sales for Retail and Food Services." Accessed April 2, 2021.

5. Bureau of Labor Statistics. " Employment Situation Summary." Table A. Accessed April 2, 2021.

6. The World Bank. " January 2021: Global Economic Prospects." Click Downloads. Accessed April 2, 2021.

7. House of Commons Library. " Brexit Timeline: Events Leading to the UK's Exit From the European Union," Page 16. Download full report. Accessed April 2, 2021.

8. House of Commons Library. " Brexit Timeline: Events Leading to the UK's Exit From the European Union." Page 74. Download full report. Accessed April 2, 2021.

9. U.K. House of Commons Library. " Brexit Deal: Potential Economic Impact." Accessed April 20, 2020.

10. Office for National Statistics. " Gross Domestic Product: Chained Volume Measures: Seasonally Adjusted £m." Accessed April 2, 2021.

11. International Monetary Fund. " GDP Based on PPP, Share of the World." Accessed April 2, 2021.

12. U.S. Department of the Treasury. " Major Foreign Holders of Treasury Securities." Accessed April 2, 2021.

13. United States Census Bureau. " Trade In Goods With China." Accessed April 2, 2021.

14. Council on Foreign Relations. " Greece's Debt Crisis Timeline." Accessed April 2, 2021.

15. Center on Budget and Policy Priorities. " Chart Book: Accomplishments of Affordable Care Act." Accessed April 2, 2021.

16. HealthAffairs. " National Health Care Spending in 2016: Spending and Enrollment Growth Slow After Initial Coverage Expansions," Vol. 37, No. 1. Culture of Health, Medicare, & More. Accessed April 2, 2021.

17. The Centers for Medicare & Medicaid Services. " National Health Expenditure Projections 2018-2027." Accessed April 4, 2021.

18. National Centers for Environmental Information. " On This Day: 2011 Tohoku Earthquake and Tsunami." Accessed April 4, 2021.

19. OECD. " Impacts of the Fukushima Daiichi Accident on Nuclear Development Policies." Pages 10 and 12. Accessed April 2, 2021.

20. National Bureau of Economic Research. " The Fed and Lehman Brothers." Page 1. Accessed April 20, 2020.

21. Congressional Budget Office. " Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output in 2014." Accessed April 20, 2020..

22. U.S Census. " New Residential Sales." Download Median and Average Sale Price of Houses Sold.xls. Accessed April 4, 2021.

23. Federal Reserve Bank of St. Louis. " Targeted Fed Funds Rate." Accessed April 2, 2021.

24. NOAA. " Table 3b. Costliest Mainland United States Tropical Cyclones, 1900-2017, after Accounting for Inflation to 2017 Dollars." Accessed April 2, 2021.

25. The 9/11 Commission. " The 9/11 Commission Report," Page 311. Accessed April 2, 2021.

26. The Office of the New York City Comptroller. " One Year Later: The Fiscal Impact of 9/11 on New York City," Page 1. Accessed April 2, 2021.

27. Brown University. " United States Budgetary Costs and Obligations of Post-9/11 Wars through FY2020: $6.4 Trillion." Accessed April 2, 2021.

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Natural disasters, financial misconduct, politics, and several other factors play an important part in how an economy reacts. When an event occurs on a large enough scale, there can be tremendous impacts on economies throughout the world. Each century has its own unique economic challenges.

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Who Was Milton Friedman?

Milton Friedman was an American economist and statistician best known for his strong belief in free-market capitalism.

Understanding Milton Friedman

Milton Friedman was born on July 31, 1912, in New York, and died on Nov. 16, 2006, in California. Friedman grew up on the East Coast and attended Rutgers University, studying mathematics and economics. He graduated from college in 1932 and went on to earn a Ph.D. in economics at Columbia University in 1946.﻿﻿﻿﻿

In 1937, Friedman took a position at the National Bureau of Economic Research (NBER) to study income distribution in the United States. After his work on income inequality, he focused on tax research and statistical analysis. A strong advocate for war in the early 1940's, he went to work for the U.S. Federal government at the Division of War Research and as an adviser to the Treasury Department, where he recommended increasing taxes to suppress wartime inflation and devised the first system of income tax withholding.﻿﻿﻿﻿

In 1946, after graduating with a Ph.D., Friedman took an economics position at the University of Chicago, where he conducted his most impactful work. During his time as a professor at the University of Chicago, Friedman developed numerous free-market theories that opposed the views of traditional Keynesian economists. In his book A Monetary History of the United States, 1867-1960, Friedman illustrated the role of monetary policy in creating and, arguably, worsening the Great Depression.﻿﻿﻿﻿

Theory of the Consumption Function

Friedman's first big breakthrough in the field of economics was his Theory of the Consumption Function in 1957, which championed the idea that a person's consumption and savings decisions are more greatly impacted by permanent changes to income, rather than changes to income that are perceived as ephemeral. This theory produced the permanent income hypothesis, which explained why short-term tax increases actually decrease savings and keep consumption levels static, all else being equal.﻿﻿﻿﻿

Friedman's seminal contribution to economics came through his analysis of prevailing macroeconomic theories. During his time as a professor, macroeconomics was dominated by Keynesian economic theory. This school of economic thought, pioneered by British economist John Maynard Keynes, emphasizes the usefulness of macroeconomic aggregate variables, holds that fiscal policy is more important than monetary policy, that government spending should be used to neutralize the volatility of the business cycle, and that prices are inherently sticky.

Monetarism

Within the general framework of Keynesian economics, Friedman developed his own economic theory with slightly different conclusions for economic policy. Through this theory, called Monetarism, Friedman expressed the importance of monetary policy and pointed out that changes in the money supply have real short-term and long-term effects-specifically, themoney supply affects price levels.﻿﻿﻿﻿ Further, Friedman used monetarism to openly contradict the Keynesian principles of the Keynesian multiplier and the Phillips curve.

Friedman was awarded the Nobel Prize in Economics in 1976 for his research on income and consumption and for his developments in monetary theory.﻿﻿﻿﻿ Over the course of his career, he published pioneering books on the modern economy, as well as numerous influential articles, changing the way economics is taught.

Milton Friedman and Monetarism vs. Keynesian Economics

John Maynard Keynes and Milton Friedman were two of the most influential economic and public policy thinkers of the 20th century. If Keynes was the most influential economic thinker of the first half of the 20th century, Friedman was the most influential economic thinker of the second half.

While Keynes is widely credited with creating the first systematic approach to macroeconomic government policy, Friedman rose to fame in part by criticizing Keynes' policy proposals and instead arguing for more emphasis on monetary policy.

Keynes's Theories

Keynes argued that an interventionist government could help smooth out recessions by using fiscal policy to prop up aggregate demand. Strategic government spending could spur consumption and investment, argued Keynes, and help alleviate unemployment.

Keynes's theories gave rise to a new dominant paradigm in economic thought, which was subsequently dubbed Keynesian economics. While still popular, some have argued that Keynesian economics has provided a pseudo-scientific justification for short-sighted elected politicians to run fiscal deficits and accumulate massive levels of government debt.

Friedman's Free Market Thinking

As Friedman developed his ideas about monetarism, he came to oppose many of the policy proposals espoused by the Keynesian economists in the post-War period. He argued for deregulation in most areas of the economy, calling for a return to the free market of classic economists, such as Adam Smith. He challenged contemporary notions of deficit spending and suggested that, in the long run, only dis-coordination results from expansionary fiscal policy.

Friedman argued for free trade, smaller government, and a slow, steady increase of the money supply in a growing economy. His emphasis on monetary policy and the quantity theory of money became known as monetarism. The popularity of Friedman attracted other free-market thinkers to the University of Chicago, giving rise to a coalition referred to as the Chicago School of economics.

Reshaping Academic Economic Thought

When Friedman won the Nobel Prize in Economic Sciences in 1976, it marked the turning of the tide in academic economic thought, away from Keynesianism and toward the burgeoning Chicago School. Friedman brought about a renewed emphasis on prices, inflation, and human incentives, a direct counter to Keynes' focus on employment, interest, and public policy.﻿﻿﻿

Keynes was seen as an enemy of laissez-faire, and Friedman became the new public face of free markets. Friedman won a major intellectual victory after three decades of Keynesian policies ended in stagflation in the late 1970s, something establishment Keynesians generally thought was impossible.

Key Implications of Milton Friedman's Theories

The following are some lessons that can be taken from Friedman and his economic theories.

1. Judge policies by their results, not their intentions.

In many ways, Friedman was an idealist and libertarian activist, but his economic analysis was always grounded in practical reality. He famously told Richard Heffner, host of "The Open Mind," in an interview: "One of the great mistakes is to judge policies and programs by their intentions rather than their results."﻿﻿﻿

Many of Friedman's most controversial positions were based on this principle. He opposed raising the minimum wage because he felt it unintentionally harmed young and low-skilled workers, particularly minorities. He also opposed tariffs and subsidies because they unintentionally harmed domestic consumers.

His famous 1989 "Open Letter" to then-drug czar Bill Bennett called for the decriminalization of all drugs, mostly because of the devastating unintended effects of the drug war.﻿﻿﻿ This letter lost Friedman a swath of conservative supporters, who he said failed "to recognize that the very measures you favor are a major source of the evils you deplore."

2. Economics can be communicated to the masses.

During Friedman's landmark interviews on Phil Donahue's show in 1979 and 1980, the host said his guest was "a man who will never be accused of making economics confusing," and told Friedman "the nice thing about you is that when you speak, I almost always understand you."

Friedman gave lectures on college campuses, including Stanford and NYU. He ran a 10-series television program entitled "Free to Choose" and wrote a book with the same name, adjusting his content for his audience.

Economist Walter Block, sometimes a friendly agitator of Friedman, memorialized his contemporary's 2006 death by writing, "Milton's valiant, witty, wise, eloquent and yes, I'll say it, inspirational analysis must stand out as an example to us all."﻿﻿

3. "Inflation is always and everywhere a monetary phenomenon."

The most famous excerpt from Friedman's writings and speeches is, "Inflation is always and everywhere a monetary phenomenon." He defied the intellectual climate of his era and reasserted the quantity theory of money as a viable economic tenet. In a 1956 paper titled "Studies in the Quantity Theory of Money," Friedman found that, in the long run, increased monetary growth increases prices but does not really affect output.﻿﻿﻿

Friedman's work busted the classic Keynesian dichotomy on inflation, which asserted that prices rose from either " cost-push" or " demand-pull" sources. It also put monetary policy on the same level as fiscal policy.

4. Technocrats must not control the economy.

In a 1980 Newsweek column, Milton Friedman said: "If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand." Though perhaps poetic, this famous quote illustrates Friedman's often doctrinaire opposition to government intervention into the economy; the Sahara Desert has in fact long been largely owned by various (African) national governments and has never experienced a shortage of sand.

Friedman was a vocal critic of government power and was convinced free markets operated better on grounds of morality and efficiency. In terms of the actual economics, Friedman rested on a few truisms and basic, incentive-based analyses. He offered that no bureaucrat would or could spend money as wisely or as carefully as the taxpayers from whom it was taken. He spoke often of regulatory capture, the phenomenon where powerful special interests co-opt the very agencies designed to control them.

To Friedman, government policy is created and carried out through force, and that force creates unintended consequences that do not come from voluntary trade. The valuable political power of government force creates an incentive for the wealthy and devious to misuse it, helping generate what Friedman dubbed "government failure."

5. Government failures can be as bad, or worse, than market failures.

Friedman combined his lessons about unintended consequences and the bad incentives of government policy.

Friedman loved pointing out government failures. He exposed how President Richard Nixon's wage and price controls led to gasoline shortages and higher unemployment. He railed against the Interstate Commerce Commission (ICC) and Federal Communications Commission (FCC) for creating de facto monopolies in transportation and media. Famously, he contended that the combination of public schooling, minimum wage laws, drug prohibition, and welfare programs had unintentionally forced many inner-city families into cycles of crime and poverty.

This concept wraps up many of Friedman's most powerful ideas: policies have unintended consequences; economists should focus on results, not intentions; and voluntary interactions between consumers and businesses often produce superior results to crafted government decrees.

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Milton Friedman was an American economist and statistician best known for his strong belief in free-market capitalism. Milton Friedman was born on July 31, 1912, in New York, and died on Nov. 16, 2006, in California. Friedman grew up on the East Coast and attended Rutgers University, studying mathematics and economics.

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Adam Smith’s 1776 classic “The Wealth of Nations” may have had the largest global impact on economic thought.

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Price Ceilings and Floors- Micro Topic 2.8

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Shifting Demand and Supply- Macro Topic 1.6 (Micro Topic  2.7)

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Demand and Supply Explained Part 2 - Macro Topic 1.5 (Micro Topic 2.2)