Question

In the year 2000, the Chinese economy’s growth was not as fast as the government expected....

In the year 2000, the Chinese economy’s growth was not as fast as the government expected. The Chinese government prolonged the Labour Day vacation (in May) to 7 days so that people could spend more.

a. Explain this decision, using the model of aggregate demand and aggregate supply. (6%)

b. Why did the Chinese government not wait until the economy adjusted back to its expected long-run position of high economic growth? (2%)

Homework Answers

Answer #1

In the year when the Chinese economic growth was not growing according to government expectations . It reveals that there was difference in actual and potential output. Actual output was less than the potential output. In order to eliminate the output gap, Chinese government follow expansionary policy and increase government sending to enhance the aggregate demand and due to government step of labor day vacation for seven days, aggregate demand was increased and shifts to AD1 and due to that prices and real GDP was increased and government expectations related to income and output rise was fulfilled.

Answer B) The Chinese government could not wait to have adjustments in the long run because low aggregate demand may signaled businesses of low profits. This can reduce production and economy can again be in the trap of recession.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In the year 2000, the Chinese economy’s growth was not as fast as the government expected....
In the year 2000, the Chinese economy’s growth was not as fast as the government expected. The Chinese government prolonged the Labour Day vacation (in May) to 7 days so that people could spend more. a. Explain this decision, using the model of aggregate demand and aggregate supply b. Why did the Chinese government not wait until the economy adjusted back to its expected long-run position of high economic growth?
In the year 2000, the Chinese economy’s growth was not as fast as the government expected....
In the year 2000, the Chinese economy’s growth was not as fast as the government expected. The Chinese government prolonged the Labour Day vacation (in May) to 7 days so that people could spend more. a. Explain this decision, using the model of aggregate demand and aggregate supply. (6%) b. Why did the Chinese government not wait until the economy adjusted back to its expected long-run position of high economic growth? (2%)
Question no 1 Consider the AD-AS model. Assume that the short run AS-curve (the SRAS-curve) is...
Question no 1 Consider the AD-AS model. Assume that the short run AS-curve (the SRAS-curve) is upward sloping (and therefore not perfectly horizontal). Assume that the economy is in a long run equilibrium, when government purchases suddenly increase. Assume that this change in government purchases was anticipated by the economic agents, and that they have rational expectations. As a result, following are options tell me correct option 1. the aggregate price level becomes higher than expected in the short run,...
1. Consider two countries: Country A and country B. At the begging of year 2017, the...
1. Consider two countries: Country A and country B. At the begging of year 2017, the GDP per capita in both countries is $10’000. The annual growth rate of output in country A is 3%, while the annual growth rate of output in country B is 5%. Population does not grow. What will be the difference in the GDP per capita of both countries at the beginning of year 2019? $200 More than $200 Less than $200 $2’000 2. Which...
My Homework: look at any one topic covered in the discussion boards making sure the topic...
My Homework: look at any one topic covered in the discussion boards making sure the topic generated a lot of interesting class participation. Re-read the comments of your peers and your original post: what do you think about the issue now? Has the conversation changed your view point or only strengthened it? Why? Finally, what are the things you can take away from the course overall? Are there specific concepts and ideas that were eye-opening to you personally? Do you...
As for the sales forecast for Year 1 through Year 3, these are some important variables...
As for the sales forecast for Year 1 through Year 3, these are some important variables I will go to consider for sales: Economy: The economic condition of the city, the province and the country are variables I need to consider for a sales forecast. If conditions are poor, people will spend less money on consumption. If economic conditions are great, then more people will have extra money to spend. Competition: I need to consider the level of competition I...
Read the RBA’s May 2020 interest rate decision: Explain: Your understanding of why the RBA made...
Read the RBA’s May 2020 interest rate decision: Explain: Your understanding of why the RBA made the decision that they did, with respect to the content of the interest rate decision statement itself and also the RBA’s policy objectives What the RBA’s monetary policy decision means in terms of practical implementation The expected transmission of the monetary policy decision to economic outcomes Statement by Philip Lowe, Governor: Monetary Policy Decision Number2020-13 Date5 May 2020 At its meeting today, the Board...
31.   An increase in government spending of $200 million financed by a new tax of $200...
31.   An increase in government spending of $200 million financed by a new tax of $200 million in an economy with a marginal propensity to consume of .90 could result in an increase in nominal GDP (assuming a closed economy with no taxes or leakages) of up to how much? (a) $0; (b) $2,000 million; (c) $180 million; (d) $200 million. 32.   One important consequence of widened income and wealth disparities is a: (a) higher rate of inflation than would...
Our discussion this week is on money, how commercial banks create money, and the central bank....
Our discussion this week is on money, how commercial banks create money, and the central bank. Take a look at the press release by the Bank of Canada from September 9. The central bank has 8 fixed dates for setting the bank rate. This press release gives the rationale for the latest decision on how to change the bank rate. The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent....
Please only answer the first question! The OECD is a club of the most advanced economic...
Please only answer the first question! The OECD is a club of the most advanced economic nations in the world – based on living standards and per capita income more than absolute size. Newer members include Turkey, Mexico and Hungary. China and India are not yet members despite their vast populations. Currently the OECD has 32 members. The 2009 OECD Employment Outlook discusses prospects for unemployment and possible policy responses. The evolution of unemployment depends on (a) the size of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT