This website uses cookies to ensure you have the best experience. Learn more

The Ad/As Model To Explain The Economy Of China

668 words - 3 pages

Using the AD/AS model, we can account for China’s economy to have stable prices by having corresponding growth in output and technology or in other words, corresponding shifts in AD curve and the LRAS curve. Since China has a floating exchange rate, the appropriate macroeconomic policy would be a monetary policy. Typical monetary policies use monetary factors like changing interest rates or money supply to change consumer spending. For example to influence spending governments would increase the money supply and that will cause interest rates to decrease, cause investment to increase and eventually increases AD. The AD curve shifts right and results in a temporary short run equilibrium at higher prices but also higher GDP. The increase in price and wages due to low productivity in labour forces prices up further and the SRAS curve shifts left, returning the economy back to the original long run equilibrium. Monetary policy is also more appropriate as fiscal policies have no effect in the long run, since equilibrium goes back to the original LRAS GDP but with higher prices if all else is constant.
As China becomes even more developed, they acquire better technology, and thus their costs of inputs will continue to decrease due to further increase in productivity of labour. The LRAS curve shifts right, leading to lower prices and higher output at the new equilibrium. If prices in China are lower than in the United Kingdom (UK) than there would be an increase in demand for goods and services in China. From UK’s point of view, it is cheaper to purchase from China than domestically, thus this will also increase in imports and decrease in exports of the UK. However, because of the increase in national income in China, there is an increase in demand for goods and services in foreign markets like the UK. This increase in foreign demand from China would result in an overall increase in the AD in the UK, the...

Find Another Essay On The AD/AS Model to Explain the Economy of China

China during the periods 221bc to 220ad and 581ad to 907 ad

2014 words - 8 pages the time periods in which these dynasties ruled, their leadership was very complex with many original processes for the time. When the Han dynasty began, the emperor removed many of the legalist features of the government, such as the harsh laws, and the reduction. At first, they let the economy develop on it's own, called laissez faire. However, after a while the Emperor began to vastly influence the economy by confiscating the land of nobles

Explain how the Levi ad. of your choice sells it's product

1342 words - 5 pages idolising the jeans to make them irresistible to the audience. If an old, ugly, obese man was to be wearing the Levi jeans it wouldn't be selling so well, would it? The Levi man appears to be very confident, daring, good-looking and is admired. The effect of all this is, this is what the audience want and giving them what they want makes the jeans sell. The characters are often seen with props. In other adverts, such as the 'stoned washed

An overview of how can the PPF model help to explain the issues of choice, opportunity cost, growth and unemployment

611 words - 2 pages , and can be used to explain a number of different issues, such as the issues of choice, opportunity cost, growth and unemployment.That is, the PPF model explains the effect all these different issues have on the economy. For instance, a PPF model, showing unemployment in the economy, demonstrates very effectively how, due to unemployment, the economy's resources are no longer fully employed and therefore is no longer as effective as it should

Explain the main features of the Spartan Economy. This essay explains the features of the Spartan economy in ancient sparta that contributes to their austere lifestyle

1181 words - 5 pages produce of their land. All land controlled by Spartans was divided into allotments : each Spartiate held a portion of the land (the kleros), which were passed from father to son, and could not be sold. The community also owned common land which could be sold and divided, which led to inequalities in wealth, and made "communism" superficial. This is the one feature of the Spartan economy, which proved ineffective as time went by, and contributed

Critically evaluate the Medical Model and the Social Model of Disability, as applied to people with learning difficulties/disabilities

3906 words - 16 pages BA Learning Difficulties/DisabilitiesSession: 2009/2010Semester: OneSubject: Psychological and Social Development (LG0901G)Student ID: 0905405/0901361Critically evaluate the Medical Model and the Social Model of Disability, as applied to people with learning difficulties/disabilities. Your answer should address how these models have developed over time.Within the essay consideration should be given to the place of intelligence and labelling

Explain the Frankfurt School's effects model and asses its usefulness as a means of determining the social impact of mass media

1572 words - 6 pages culture industries, along with consumer societies, were solidifying modern capitalism, and so they sought new strategies for change, which required, in the long term, a re-examination of the Marxist theory.The Frankfurt School's effects model, or as it is sometimes known, 'hyperdermic model', concentrates on the effects of the media; the role it plays in our lives and what it does to its audiences. The fact that it is often referred to as the

Explain briefly Ninian Smart's seven dimensional model of religion. Do you think that Smart's model solves the problems that arise when attempting to define religion?

1161 words - 5 pages religions and accept them as another aspect of its complex nature.Shaw's model is flexible enough to accommodate the various aspects of Hinduism; this shows the model to be diverse, adaptable and as it does not define religion in terms of a particular trait, it resolves the issues that arise from substantive and functional definitions.However, although Smart acknowledges that there would be religions in which one or more of his aspects are weak or not

Trade in China and the Success of its Economy

5048 words - 20 pages if bank runs were to be triggered by a loss of depositor confidence – the major role of these banks could cause widespread instability in the economy (Lardy, 1998). The banking sector cannot be reformed separately; it works together with state-owned enterprises and public finance policy. Although the state-owned enterprises are undergoing consistent reform as China works to become internally and internationally competitive in all areas, they

5 sector model RE the Economy

576 words - 2 pages Economics is so complex and there are so many different paths the economy can take, that the 5 sector model was devised to simplify the way we can look at it. The model attempts to illustrate how money should theoretically flow in the economy.The first sector is the household sector. This consists of consumers who earn income in the form of wages, rent, interest and profit from the business or firm sector. In turn, consumers use this income to

"Critically analyse one theory to explain the global political economy" I examined the Dependency Theory

2562 words - 10 pages ABSTRACTThere are no universal truths in political theory. This essay is about Dependency Theory and its use to explain the global political economy. Dependency Theory is a political interpretation of the way economic systems impact on the Less Economically Developed Countries. . As a theory it is an activist for change but also a means of understanding the world order and it is for these reasons I chose it above other theories I examined. I

Explain the reasoning behind the references to Amenhotep III reign as being the "Golden Age" of the Egyptian Empire

569 words - 2 pages III to maintain its high status. It is even suggested that he did more harm then good, as many believe he was the instigator behind the motives of Akhenaten, his son, who would later become responsible for throwing Egypt into chaos.When Amenhotep III inherited the empire at the age of twelve, Egypt was in no great danger. Solid diplomatic policies established by his grandfather Amenhotep II, and his father Thutmose IV, along with the conquests of

Similar Essays

The Extended Ad As Model And The Phillip's Curve

1330 words - 5 pages wages, real output is Qf regardless of the specific price level.Long run equilibrium:In the long run equilibrium, the aggregate demand will be qual to the short run supply as well as the long run supply curve.With this detailed discussion of the AS-AD model let us now move to our main topic i.e. Demand pull nad cost push inflation in the long run.Demand pull inflation in the Extended AS- AD model:An increase in the aggregate demands from AD1 to

The Economy Of China Essay

764 words - 3 pages techniques.Agriculture: In 1985 employed about 63 percent of labor force; proportion of GNP about 33 percent. Low worker productivity because of scanty supplies of agricultural machinery and other modern inputs. Most agricultural processes still performed by hand. Very small arable land area (just above 10 percent of total area, as compared with 22 percent in United States) in relation to size of country and population. Intensive use of land; all fields produce at

The Understanding Of The Three Concepts And Relate This To The Circular Economy Model

1020 words - 4 pages economy movement which has seen many multi-national companies as well as smaller indigenous businesses move towards a more sustainable business model. A greater emphasis is placed on survival of these companies. Circular economy has proved an effective way of doing business for these companies to be sustainable both in the market place and as part of the earth as a whole.The scale of a company is the difference between a small corner shop selling

Explain How The Neoclassical Growth Model Can Be Extended To Enhance Our Understanding Of Economic Growth

1858 words - 8 pages , economic growth arises due to influences outside economy. As an exogenous growth model it focus on four variables: output (Y), capital accumulation (K), Technology (A) and labor or population growth (L) in order to explain economic growth. In 1798, Malthus raised the issue that once population growth had outpaced agricultural production subsistence-level conditions would result and hence, convinced other economists that natural resources, production