Macro & Micro economics - Essay Example

Download file to see previous pages... The report also comments on the Government of China’s policy actions that are aimed at boosting the growth rate of the country’s economy (BBC, 2013). China's economy is the second-largest economy in the world. Currently, the country’s GDP has been estimated to be $12.38 trillion (according to the 2012 estimate) (CIA, 2013). However, recently the growth rate of the economy has slowed down significantly. After noting the declining performance level of the economy for the past few months, government has adopted certain policy prescriptions to improve the health of the economy. This paper discusses the main causes that lead to this issue and the level and pattern of impact that the problem casts on Chinese economy and society. The aggregate demand as well as the supply of goods and services in the economy is affected by this change in growth rate. The government is following expansionary monetary policy to improve investment climate in the economy and has increased level of public spending in order to increase domestic demand in the economy. Discussion on the economic problem issue China has depicted “soft growth momentum in the first quarter” (BBC, 2013) of 2013. ...
Causes of the problem The article on BBC highlights two major concerns over the declining growth rate of the Chinese economy. Firstly, the economy has been heavily dependent on the export of various commodities and the major exports markets for the country are the USA and the European countries. The major items exported by the country are transport equipments, garments, accessories, toys, plastic products, machinery, rubber, textile, metallurgical products, Chemical products, fuel materials such as crude oil and refined oil, and food items (Peopledaily, 2001). China follows an export led growth and it has remained the largest contributor to the output of the global economy and accounts for nearly 3 percent of the global output. Although according to the International Monetary Fund, Chinese contribution to the global output is set to exceed that of USA, Germany and Japan; some economists have claimed in the past that the country would not be able to sustain its growth rate on the basis of exports for a long time. After the financial crisis of 2009 that had hit the USA and the European countries hard, economic growth in these countries slowed down. These countries faced serious financial crunch and their import demand decreased. Therefore, the Chinese economy experienced a loss of in export market. This had a major impact on the economy and its performance. Since the exports in the Chinese economy weakened, different sectors in the economy slowed down their production rates and the total output in the economy decreased that is reflected in the country’s gross domestic product. The constant sluggishness of economic performance in these advanced countries, ...Download file to see next pagesRead More