The paper "For China’ s Struggling Economy, 2016 May Be Worse than 2015" is an outstanding example of a micro and macroeconomic assignment. The main issue that is discussed in the article is that in 2015, China’ s economy experienced one of the weakest growth rates in 25 years and that 2016 will more difficult. The issues identified as contributing to the poor economic performance are structural inefficiencies and the government’ s half-hearted push for economic reforms. The article discusses what the Chinese government has done as part of efforts to revive economic growth.
Such efforts include creating a monetary stimulus, creating a stock market bubble and creating a bond market bubble. However, despite these efforts, China was facing even more economic difficulties at the time of writing the article. This was reflected in the collapsing commodities market, which saw China’ s CRB index declined by 15 per cent in 2014 and by a further 27 per cent in 2015. The article also discusses measures that can be used to remedy China’ s situation by noting that the government should develop a detailed plan to facilitate economic stability, absorb recurrent losses, and ensure a balance in the economy.
Some of the approaches to be applied include shifting incomes to the household sector by reducing contributions to social welfare schemes and reducing income tax and consumption. (b) The demand and supply model of exchange rate determination is based on the demand and supply of the foreign currency vis-à -vis the domestic currency. For instance, in the case of China, the domestic currency is the yuan while the foreign currency is the US dollar, which is commonly used as the medium of exchange in international transactions.
In this view, the sources of supply of the US dollar are foreigners who want to buy goods or services from China and pay using the US dollar. Sources of demand are domestic residents in China who want to import goods or services from other countries and therefore have to pay for their purchases using the US dollar. As noted by Jain and Khanna (2010, p. 316), foreign investors purchase domestic goods using foreign currency, hence supplying foreign currency to the domestic exchange market (in this case China).
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