Macroeconomics_101-Issues

Macroeconomics 101-Issues Part 1: I actually found three related articles pertaining to China’s latest five-year plan. The Chinese plan is to move away from the current economy model that is based on exports and public works projects and move towards a model that will enhance and encourage consumer spending. One part of the plan is to build affordable housing - 10 million homes this year and a total of 36 million over the five year plan. Chinese consumers will not have to save for high cost housing and will have more spending money. Another part of this plan is to try to lower inflation. The Chinese had the highest inflation increase last year since 10/08. To try to get inflation under control, the government has ordered banks to raise interest rates and curtail lending. The Chinese plan seems to have good intentions-raising personal income, building affordable housing, contributing money to health and welfare programs. However, as China is the second largest economy in the world, a plan to reduce their trade surpluses will have long reaching affects on nations that rely of their exports. Part 2: The whole plan that China is moving forward with is a Macroeconomic issue. These plans affect the whole Chinese economy and will affect many other nations’ economies. If China choses to reduce its trade surpluses, other nations must find other resources for products currently being imported from China. If this plan is effective, the Chinese people will realize an increase in personal income, a reduction in housing costs, better healthcare and welfare programs. Their whole way of life has the potential for improvement. This could produce long term affects by giving consumers the ability to save more for future consumption. The Chinese economy could “level out”, making it more feasible for the economy to continue to grow-not peak and come crashing down, unable to contain or sustain itself. Part 3: This article covers several Macroeconomic issues that have been raised in this course so far. * GDP-China’s GDP rose 10.3 percent from 2009 to 2010. But the consumer spending portion of the GDP has fallen about 10 percent from 2000 to 2009. * The Chinese government is trying to curtail inflation. If inflation continues to rise, the Chinese people will have less money to use for their basic needs. * Trade surpluses-China’s trade surplus is reported at $183 billion for 2009. If the plan proceeds to diminish this relationship, other nations’ economies will be affected. * 8 basic economic goals: economic growth, full employment, price stability, choice, efficiency, equitable distribution of income, balance of trade, economic stability. I think this plan touches on many of these. The Chinese plan looks to stabilize economic growth to provide economic stability in the future. New housing projects could lead closer to full employment. The plan calls to increase wages, moving towards a more equitable distribution of income. This income will allow the Chinese people to make different choices in their dollar votes. Sources: http://www.nytimes.com/2011/03/03/world/asia/03china.html'_r=2&scp=5&sq=economy&st=cse http://www.nytimes.com/2011/03/15/business/global/15inside.html'_r=1&sq=chinese economy&st=cse&adxnnl=1&scp=7&adxnnlx=1300187032-UAdi/vdJjNeMBHLxZDot3w http://www.nytimes.com/2011/03/12/business/global/12yuan.html'scp=9&sq=chinese%20economy&st=cse