Homework Question on Inflation in China
- How does the central bank or government curb the inflation in China? For example, China’s adjust the reserve requirement ratio to control the bank’s liquidity.
- Try to be as quantitative as possible (use different variables to explain the action like unemployment rate, inflation rate, GDP, and so on) and cite all your sources.
Homework Answer on Inflation in China
Inflation is considered as the parameter used to measure the strength of the general population and their welfare. Mostly, it is measures by the purchasing power parity of an economy and its long term goal and objective influences the economic development of a country. Inflation is influenced by various factors from taxes, monetary and fiscal policies of a country, economic growth level represented by the Gross Domestic Product (GDP) and finally the unemployment rate.
The rate and status of inflation within a country or an economy is also measured by the commodity prices prevailing in the country. In this paper, we discussed the concept of inflation and its historical trends across the world with major emphasis in China. The paper also examined the various literatures with regard to the concept globally concentrating in Chinese economy. Data and model with regard to inflation was also included with China recording a steady rate of inflation compared to other developed economies.
The world has witnessed high levels of unemployment contributed by the rapid population growth rate and the recent world economic crisis (2007/08). However, various institutions, especially central banks of various countries no longer consider this as their main objectives and have narrowed down in restraining inflationary rates. The objectives of these institutions have been the utilization of monetary policies in order to restrain inflation rates to a single digit.