Comparison of Inflation, China and the Us
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Comparison of Inflation, China and the US
ECON220: Principles of Macroeconomics
Comparison of Inflation, China and the US
Inflation is a persistent increase in the price of different commodities without a corresponding change in quantity demanded. As such, inflation is a macroeconomic indicator used to measure economic performance of a nation. This research paper sets out to compare inflation in China and United States.
The Chinese economy is recorded as one of the strongest and fast growing economy in the world. In the last two decades, the economy has recorded a fall in unemployment and economic growth, but inflation persists. With the economy, engaging in vigorous policy and structural reforms, the economy has turn out to be resilient, flexible and well integrated within worldwide markets. The main objective of the Chinese government is to keep inflation as low as possible. Therefore, the country’s policy makers will have to adopt inflation targeting monetary policy. Under this monetary policy, the target is to sustain inflation at a favourable range. The inflation target can only be attained through the Central Bank’s periodical adjustment on the interest rate target. The economy will adopt a contractionary monetary policy where the amount of money supplied in the economy is reduced making the interest rates soar leading to low inflation rates. With the open market operations, the interest rate can be kept constant for a no significant change according to various economic indicators. According to the Bureau of Economic Analysis estimates, the current rate of annual growth rate of the real GDP in the year 2012 is estimated to be only 1 precent. This translates to 0.25 precent growth rate as the quarterly growth rate. This rate of economic growth is very insignificant compared to the 3.3 precent growth rate that was the experience in the last quarter of last year. The volatility of...
ECON220: Principles of Macroeconomics
Comparison of Inflation, China and the US
Inflation is a persistent increase in the price of different commodities without a corresponding change in quantity demanded. As such, inflation is a macroeconomic indicator used to measure economic performance of a nation. This research paper sets out to compare inflation in China and United States.
The Chinese economy is recorded as one of the strongest and fast growing economy in the world. In the last two decades, the economy has recorded a fall in unemployment and economic growth, but inflation persists. With the economy, engaging in vigorous policy and structural reforms, the economy has turn out to be resilient, flexible and well integrated within worldwide markets. The main objective of the Chinese government is to keep inflation as low as possible. Therefore, the country’s policy makers will have to adopt inflation targeting monetary policy. Under this monetary policy, the target is to sustain inflation at a favourable range. The inflation target can only be attained through the Central Bank’s periodical adjustment on the interest rate target. The economy will adopt a contractionary monetary policy where the amount of money supplied in the economy is reduced making the interest rates soar leading to low inflation rates. With the open market operations, the interest rate can be kept constant for a no significant change according to various economic indicators. According to the Bureau of Economic Analysis estimates, the current rate of annual growth rate of the real GDP in the year 2012 is estimated to be only 1 precent. This translates to 0.25 precent growth rate as the quarterly growth rate. This rate of economic growth is very insignificant compared to the 3.3 precent growth rate that was the experience in the last quarter of last year. The volatility of...