• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Econ commentary. The article talks about inflation in China. The CPI rose 4.9% in February.

Extracts from this document...

Introduction

Econ Commentary 2 News article Title: Business Daily Update: Heightened inflation a concern in China Source: Business Daily Update (China) Date: March 28, 2011 Commentary: Date Written: 25/03/2012 Word Count: Name: Fernanda Lai The article talks about inflation in China. The CPI rose 4.9% in February. Inflation is a sustained increase in the price level of an economy over time. The main cause was major companies in China, especially those that produce commodities, raising prices of their goods. "Four leading daily consumer product manufacturers, will raise prices by 5 to 15% starting next month", and these companies command four-fifth of China's consumer product market share. The raise in prices will cause higher inflation, and will have quite a big impact. The companies said the increase in prices was due to rising raw material and energy costs. Higher oil prices have contributed to inflation. ...read more.

Middle

There is an increase in price level as shown by the shift from P to P'. A shift in the aggregate supply curve generates cost-push inflation. However, the Bank of China argues that developed countries "will continue their loose policies and global liquidity will remain ample, which will keep prices of commodities, especially crude oil and grain, at high levels." One effect was "rush buying" after prices were reported. An expectation of the increase in prices lead to an increase in aggregate demand, which is the total demand for final goods and services in an economy at a given time period and price level. It affects the component of consumer expenditure. This is shown by the rightward shift in the aggregate demand curve from AD to AD'. Analysts said the news of price increases could exacerbate inflation concerns in China, especially among older consumers who suffered double-digit inflation in the 1980s. ...read more.

Conclusion

It is estimated that it takes 18 months for interest rates to take effects, therefore it is hard to control inflation only through interest rates. Also some sections of the economy are not affected by high interest rates. However, inflation can cause a reduction in the in the real value of savings, this means that the rate of interest does not compensate for the increase in general price level. Additional Comments: You could say that the government could employ supply-side policies. As in subsidize production, and train workers to improve their efficiency. This will increase AS and reduce price level. LNOG TERM AND SHORT TERM leakages have increased. growth of inflation contractionary monetary policies [u1]Define AS for more marks in one of the criteria (forgot which one!) [u2]You can also say that it will reduce consumer spending. Consumer spending is a component of AD. AD = Consumer spending + Investment + Government Expenditure + Export - Import. Hence, fall in consumer spending will cause AD to shift to the left. So, price level will go down. ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Economics commentary - The economic crisis caused deflation in 2009, but consumer price levels ...

    the cost of products in Ireland through raw materials, that are traded internationally. C) INTEREST RATE Diagram: Long-term interest rate statistics for all Eurozone countries.3 Low interest rates in a booming economy, like Ireland's before 2000 fueled domestic spending and spurred inflation in wages and goods as there was a

  2. Commentary on Indian News Article "Food prices push inflation to 6.95%"

    "Going forward in third quarter of this year, food prices may moderate but I expect the fuel inflation to move up sharply," he says. The changing food patterns are the cause of inflation and even fiscal measures cannot combat that, he adds.

  1. Economics IA Commentary - Protectionism. Title of Extract: China Expands Export Quotas with ...

    It does this by a multitude of measures including tariffs, quotas, embargoes, export subsidies, import licensing and exchange controls. A Voluntary Exporting restraint, like the export quotas in China, is when the exporting country voluntarily restricts the number of goods it ships to its trading partners.

  2. Evaluating interest rates

    This will create fewer jobs as there will be fewer needs. Investment play a part in this as if there is a less investment in a company it will not be able to pay that many incomes and will be forced to dismiss some of its employees.

  1. Economics Article Commentary - The article deals with the raise of a tariff on ...

    The Chinese producers gain market-share as S (domestic) shifts to S(domestic+subsidy), illustrated by the increase in area from a to a+b+e+f+g . The foreign market share falls from b+c+d to c+d. The occurring inefficiency through the subsidization is g, as this is the difference between S(world) and S(domestic)

  2. IB economics commentary - Inflation

    Food items were the most affected by the inflation due to the fact that they are necessities and consumed daily by all income classes. The prices of non-food products, such as durable goods, fell instead of rising; in fact, if you adjust the price drop for quality improvement of goods, the drop is even sharper.

  1. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    Consumer sentiment in America rose following World War Two as the survival of the military-industrial complex defied expectations. The expansion of the Iron Curtain pulled Europe and America into a cold war with the Soviet Union. In response, the government initiated investments in sophisticated military technologies such as the hydrogen bomb.

  2. Commentary on the article. The introduction of the weed pass in Amsterdam will lead ...

    problems, but it would rather depict a users personality to many people. Commonly associated personalities of cannabis consumers are; being lazy and slacking on work. While it cannot be measured till what extent this is true, it should be considered a social cost of consumption.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work