Figure 5.24 is a time-series graph of the nominal and real GBP/USD exchange rate from 1953 to 2023, indexed to 1 in 1953. It highlights key events such as the 1967 devaluation under the fixed-rate system and the rapid nominal depreciation after the 1971 shift to a floating-rate system. The chart also demonstrates how higher UK inflation relative to the US led to a real appreciation of the pound in the 1970s, preserving competitiveness despite the nominal fall.

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Figure 5.23 is a line chart that presents data on the UK economy from 1953 to 2023, designed to illustrate the country's economic evolution and policy responses to shocks over the broader 1950-2023 period. The vertical axis, scaled from -4% to 24%, plots two key variables: the CPI inflation rate and the unemployment gap (the difference between the unemployment rate and NAIRU). The chart reveals that while CPI inflation was highly variable with significant peaks, especially in the 1970s, the unemployment gap followed a more subdued and stable trend. The figure also serves as a guide, linking to supplementary charts on other UK macroeconomic variables.

UK CPI Inflation and Unemployment-NAIRU Gap (1953–2023) [Figure 5.23]

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Macroeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Macroeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

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