Part of The Student Room Group

  • 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

or


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

    Overall, the price effects of an export tariff are similar in direction to that of a VER, import quota and import tariff. In relation to the article, one advantage of such a pricing strategy is that by controlling worldwide supply, trading prices for rare earth metals will be kept high.

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

    Policy has focused mainly on exports, with imports given little attention. ii) US dollar -the sustained appreciation of the dollar relative to the euro has increased many import costs, feeding into the overall inflation. Ever since the launch of the Euro, it has been in steady decline against the US

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

    and S(domestic) also here, there is structural unemployment in foreign supplier?s countries and consumers are affected by taxes, as they fund the subsidies. Therefore as a consequence the taxes might rise. This might lead to increased transport and therefore constraints to environmental sustainability as well.

  2. Commentary - This article talks about the clear and significant rise in price of ...

    This will move the equilibrium price from P1 to P2, increasing the price of coffee because at the initial price there will be an excess of demand. The article makes reference to the fact that sales have not dropped too much even though the price of coffee has increased, which

  1. Economics Commentary on "Cotton Advances to a Record for Sixth Day on Supply Concerns"

    There is a dead weight loss in the supply in cotton, but there is also a dead weight gain for producers because cotton is continuing to be demanded at the same amount as before. This makes it seem as though cotton is a relatively inelastic good?a good or service that,

  2. Economics Commentary - the article is about the rising tariffs in the trade ...

    ________________ 1. State what is tariff. ________________ ?The United States is looking for the World Trade Organization's help in fighting Chinese tariffs on U.S.-made automobiles.? The Chinese tarffs on U.S.-made automobiles, which is taxes on imported American vehicles, is used for two proposes, one is to protect a domestic industry from foreign competition, and the other is to raise revenue for the government.

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