Question

3. Why is the overall demand (AD) gradient negative? What factors will make ad move outward? Is the negative growth of many countries this year caused by ad moving to the left? Will China Record positive growth, and is it due to the outward movement of ad line?

Answer 1

Changes in aggregate demand are not caused by changes in the price level.

Instead, they are caused by changes in the demand for any of the components of real GDP, changes in the demand for consumption goods and services, changes in investment spending, changes in the government's demand for goods and services, or changes in the demand for net exports.

AD curves move outward due to following factors-

1) Suppose consumers were to increase their spending on all goods and services, perhaps as a result of a boom. Then, the aggregate demand curve would shift to the right.

2) Suppose interest rates were to fall so that investors increased their investment spending; the aggregate demand curve would shift to the right.

3) If the incomes of foreigners were to rise, enabling them to demand more domestic‐made goods, net exports would increase, and aggregate demand would shift to the right. These are just a few of the many possible ways the aggregate demand curve may shift.

Yes, the negative growth of many countries this year caused by ad moving to the left.

Due to covid 19,many people lost their jobs or suffer big losses in their business.

As a result ,income levels of the individuals living the country declines, causing AD curve moving to the left which leads to negative growth of many countries

China on Tuesday reported robust growth in foreign trade in September, with exports and imports in U.S. dollar terms rising 9.9 percent and 13.2 percent respectively from a year earlier, as demand from trading partners recovered strongly after the lift of coronavirus restrictions.

J.P. Morgan Chief Economist Zhu Haibing told CGTN that China outperformed global trade as the country was one of the few countries that began recovering on the production side.

Exports in September were extended from a solid increase of 9.5 percent in August. The strong gains were broadly in line with the Reuters forecast of 10 percent.

The country's imports in September rose at a fastest pace this year, returning to growth from a drop of 2.1 percent in August and much better than the Reuters prediction of a 0.3-percent increase.

Data from the World Trade Organization shows that China's foreign trade accounted for 12.6 percent in global trade, up 1 percent from the same period of last year. Both exports and imports hit a record high share in global trade.

"China takes advantage of its 'first in first out' from the pandemic," says Zhu. "China is one of the few countries where production side first recovered, much earlier than the rest of the world."

Analysts from Nomura echoed Zhu's view, and predicted that "China's export could remain elevated for another couple of months.

China's exports benefit from medical supplies and "stay-at-home" items that are in strong demand from countries affected by the pandemic. The two categories contributed 2.2 percent and 1.2 percent respectively to export growth in the first three quarters.

In addition, export of made-in-China electromechanical products edged up in terms of its share in the total export value. The customs authority says that's an optimization in China's export structure.

Zhu says China's production-led recovery differs from the consumption-led recovery seen in other countries like the U.S. "So that created a discrepancy and China filled into the market gap," said Zhu. "that's probably a more important story behind a very strong export read

The improvement in China's import suggests "stronger domestic demand" in China, according to analysts from Nomura.

Imports surged in September, mostly in raw materials and other industrial inputs, also indicated strong momentum in domestic industrial production, said Wang Dan, chief economist with Hang Seng Bank China.

"The overall trade performance seems to suggest that China's dual circulation strategy has withstood the test," she added.

Wang said demand from US, Europe and ASEAN all recovered strongly, not only in medical devices, but also in electronics and electric machinery.

She explained, "This is partly due to the furlough scheme in western countries that have supported workers' income and spending. We expect the foreign demand to stay strong in the fourth quarter with the holiday season boost."

Therefore, The improvement in China's import suggests "stronger domestic demand" in China, according to analysts from Nomura.

Imports surged in September, mostly in raw materials and other industrial inputs, also indicated strong momentum in domestic industrial production, said Wang Dan, chief economist with Hang Seng Bank China.

"The overall trade performance seems to suggest that China's dual circulation strategy has withstood the test," she added.

Wang said demand from US, Europe and ASEAN all recovered strongly, not only in medical devices, but also in electronics and electric machinery.

She explained, "This is partly due to the furlough scheme in western countries that have supported workers' income and spending. We expect the foreign demand to stay strong in the fourth quarter with the holiday season boost."

Hence,considering these facts,we can say that China will record positive growth, and it will be due to the outward movement of ad line