This excerpt is from Dow Jones Newswires magazine. It considers the rise in inflation in China with connections to variations in GDP rate. The article even highlights the factors that are attributed to such rising inflation and GDP…
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Moreover, it focuses on the measures utilized by the Federal Reserve to tackle inflation. Additionally, it emphasizes the importance of price stability within the Chinese economy with specific concern to the fluctuating CPI (Consumer price index). The article talks about persistent inflation in China. The models and theories used in this article are: 1. Demand-Pull Inflation 2. Price Level connection with Real GDP 3. Business Cycle 4. Monetary Policy 5. Price stability 6. Consumer Price Index Points Highlighted from the Newspaper Article but inflation accelerated to a nearly three-year high in March, (GDP figure is better than expected) GDP figure is better than expected tightening monetary policy, consumer price index rose 5.4 per cent from a year China's producer price index, CPI fell 0.2 per cent China's anti-inflation policies were effective. necessary to maintain price stability inflation almost always falls in the month after the Lunar What is Inflation and Why Inflation increased in China? What Does Inflation Mean? The rate at general level of prices of items and services rises. The subsequent fall in purchasing power is also result in inflation. Central banks try to stop the severe inflation, along with the severe deflation, in order to keep the excessive raising of prices to minimum. Economists distinguish between the two types of inflation: Demand-Pull Inflation and Cost-Push Inflation. (Defining Inflation )Both types of inflation may cause an increase in the economical price level within the economy. Demand-pull inflation may result when aggregate demand for goods and services in the economy rise at a rapid space than an economy's productive capacity. This is shown in the figure below The excess demand is the reason for consistent inflation in the economy. Moreover, experts also attribute China inescapable inflationary spiral to US dollar pegging as long as China Yuan keeps pegged to the U.S. dollar, it will rise. This is because the American economy is weakening where as the China economy is strengthening (What is the real reason behind Chinese inflation, 2011) China therefore needs to control Yuan appreciation (China Inflation cause concern in Business News , 2011) During the peak periods of business cycle when China’s economy is experiencing growth in real GDP, employment will naturally increase, and unemployment decrease would decrease, this is because the businesses would seek workers to produce a higher output to fulfill demand needs. If the real GDP grows better this can cause price inflation as firms would be forced to fight against one another for generally increasing scarce workers. This is in contrast during the trough periods of the business cycle where the economy is experiencing declines in the real GDP, and unemployment rates becomes high. GDP = (Total dollar value of goods and services that are changing hands) MINUS (Inflation) GDP can grow, even when there is inflation GDP is: Yes, GDP (Gross Domestic Product) can even grow, when there is inflation. But for such to happen (theoretically) more goods and services would actually need to be exchanged, rather than having the same prices for the same amount of goods and services. One of the reasons that the China’s Economy is able to claim that GDP ( Gross Domestic Pro
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(Chinas Inflation and Related Factors Essay Example | Topics and Well Written Essays - 3000 Words)
“Chinas Inflation and Related Factors Essay Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.org/macro-microeconomics/1422933-chinas-inflation-and-related-factors.
In the same way, it will provide an analysis into some of the effects of inflation while focusing on the different types of inflation arising from different economic situations. Introduction Inflation is described to be a rate in which the overall price of goods and services is increasing while the purchasing power decreases in an economy (Nicholson 57).
In effect, inflation is the loss or the diminishing of value of money in a given economy (Blanchard 45). In plain language, inflation is the instance where goods and services get expensive or the phenomena where people complain that the price of commodities is rising.
Oil prices are determined by the help of other countries especially Latin America and Europe. Therefore oil prices in these countries affect Bahrain’s economy. Inflation in Bahrain is affected by goods such as food, beverages, tobacco and services such as medical car, transport and communication.
In common usage inflation refers to the state of the economy when the money supply is much higher than the physical quantity of goods available in the economy. According to Keynes, inflation refers to that phase of rise in the general price level after the output in the economy grows beyond the full employment level of output (Frisch, 1983).
The effects of inflation can affect an economy in positive and negative ways or both positively and negatively simultaneously because it affects the differently. In many circumstances, there are different explanations that could be given to the rise of inflation in an economy and which could explain the reasons why a currency can lose its purchasing power as compared to different circumstance in market.
Businesses are reluctant to make investments during periods of volatile inflation. Countries suffer from a tax rate that is based on pre-inflationary periods that are less than the current value. It also causes exports to go down as prices go up resulting in a trading deficit.
This discussion concludes by outlining control measures necessary to manage inflation and the alternatives polices that can be taken by the government to manage inflation.
Inflation refers to increment of price levels in
Inflation refers to increment of price levels in general that is the rise in prices in not on individual commodities but in all areas over a period of time. It’s a change expressed in percentage and compared over
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