ABSTRACT
This chapter draws on some examples of economic relationships from the dependence of the United Kingdom economy upon imports. It examines the effect of changes in imports upon the balance of payments. The 1954 input-output table shows the dependence of each industry upon the outputs of other industries. The input-output tables showed that each of the components of final expenditure required large amounts of imports for their production. The student can take as a general rule—with hardly any safe exceptions—that he should always plot on scatter diagrams the changes rather than the original series themselves. Determine the relationship, using a scatter diagram, between the annual change in the liquidity ratio and the annual percentage change in the average yield on Consuls. To show a relationship of cause and effect between two economic time series it is nearly always necessary to eliminate the trend first.
