• 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 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%"

    "It is only focus on agriculture that will reduce inflation." The Confederation of Indian Industry says the upturn in inflation spelt bad news for the industry at a time when the industry was reeling under the impact of an investment-led slowdown caused by a tight monetary policy and with manufacturing

  1. Rising unemployment and inflation commentary. The above article Bah Humbug talks about the ...

    sector sheds jobs because of the harsh spending cuts it has announced. But that didn't happen this autumn and, as a result, overall employment also fell by 33,000 over the same period. That is an ominous sign, given the fact that the OBR expects a marked slackening in GDP growth

  2. Costs of inflation and deflation and evaluation of supply side policies

    In some countries where central banks are independent they use such policies. Because it is not going to be elections and its goals are always for the long run. That is, as long as people have faith in the central bank's ability to contain inflation, then they will not expect higher rates of inflation.

  1. 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.

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

    of solar power is driven down, thus substitutes become more attractive and PED gets more elastic. As it were ?the falling costs for solar panels? (line 28) made the solar panels more attractive to the industry and now the tariff leads to ?higher prices for consumers? (line 32).

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

    Supply and Demand Curve of Cotton 2 Due to the previous change in supply, that shifted the curve to the left, prices were already at a record high. Now that the global demand for cotton has gone up, the demand curve is shifting to the right.

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

    Application- First of all this is the topic of international trade, so define what international trade is. 1. Explain the rising tariffs of U.S.-made vehicles are a type of trade protection. 1. State what is trade protection. ________________ Tariff is the most common form of trade restriction.

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