Question

In: Economics

Part  I                                       &nbs

Part  I                                          Answer all questions

Q1) In addition to capital accumulation and technological progress, what are some of the other possible explanations for recent output growth in China?

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Q2) Will the CPI and GDP deflator always move together? Explain.

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Q3) First, explain why the money demand curve is downward sloping. Second, explain what factor(s) will cause shifts in the money demand curve.

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Q4) Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a reduction in consumer confidence will have on output, the interest rate, and investment.

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Solutions

Expert Solution

Q1: The major factors for recent output growth are as follows:

1. Labour supply: There is a plentiful supply of workers in China with a steady stream of rural-urban migrants in search of work.

2. High savings rate

3. low wages and high employmemnt

4. Increased Female participation in the workforce

5. Political system: The non-democratic and authoritarian political regime in China has meant that it has been possible to embrace western-style free market economics while maintaining control over the political system.

6. Export-led growth

7. Special Economic Zones and FDI : china is highest recipient of foriegn direct investment.

8. Promotion of private enterprise
9. Investment in infrastructure

10. Economic diversification : China has recently started to diversify into Research and Development, specialist manufacturing and hi-tech industry.

Q2: Although both the GDP deflator and the CPI are measures of the price level, the two do not necessarily move together all the time. In 2005, the annual GDP deflator inflation was 2.7% while the CPI inflation was 3.4%. The rise in oil price increased the price of goods consumed relative to the price of goods produced in the US.

Q3: Dear student/learner, According to our protocol I am obliged to solve only one question. Out of courtesy i have solved three for you. you can post the last question separately. It would be our pleasure to help you solve the question.

happy learning

Rahul Sunny answered 8 months ago
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