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Macro-Economics / China - Coggle Diagram

- - - - Statistics not comprehensive (unemployment)
  - - - Trying to have open market whilst still 'controlling' it. Contradictory.
        
        Free Market 'embraced' = income inequality growing
        
        Free market if price rise, supply will rise, put downward pressure on price
        
        Prices are rising, falling and should cancel each other out
        
        Specialisation and trade leads to greater overall growth
        
        Trade increases the ability to exploit economies of scale and scope and so puts downward pressure on prices).
        
        Increased competition due to trade leads to lower prices and higher growth
        
        Big cause of high sustained growth without inflation is faster technological change.
        
        Faster technological change gives you more growth in output and lower prices
    - - Pollution
        
        Cannot internalise these costs
        
        Impacts on future economic activity
      - Congestion
      - Noise
- - - - Fiscal Policy
        
        More & Better working markets
        
        Gov enable
        
        Tries to address income inequality by income redistribution (ie less government, more markets)
        
        Incentives and productivity improvement
        
        Incentives to work more
        
        Welfare to work schemes
        
        Cutting Welfare Budget
        
        Increase Personal Income Tax Allowance
        
        Incentives to work harder
        
        Incentives for firms to invest more
        
        Basic economic theory shows that increased competition leads to higher output at lower prices.
        
        Privatisation of State Owned Companies
        
        Deregulation
        
        Stronger Competition (Anti Trust) enforcement
        
        R&D
        
        Tax Cuts
        
        2 more items...
        
        Safeguard IP
        
        Market based approach
        
        Long lead times for effects to take place
        
        Largest income through taxation
        
        Regressive
        
        Proportionately more from people with lower incomes. VAT, lottery
        
        Proportional
        
        Flat % of income
        
        National Insurance
        
        Progressive
        
        ie Income tax (income rises, tax % rises)
        
        Direct
        
        Usually applied to income
        
        Indirect
        
        Usually applied to expenditure
        
        Fiscal rules mean that fiscal policy will not contribute to inflation (rising prices) via excessive
        government spending
      - Non-Inflationary Monetary Policy
        
        Central Banks
        
        Transmission mechanism indirectly via market
        
        Fine tune GDP
        
        Work to get production to possibility frontier
        
        No positive (inflationary) and no negative (recessionary) output gap
        
        Output gap is actual less potential output (GDP), as a percent of
        potential output (GDP).
        
        Positive gap means unemployment below natural rate. A positive output gap occurs when actual output is more than the potential or full-capacity output and can lead to inflation as production and labour costs rise
        
        Main current method for fine tuning GDP
        
        Able to cope with stagnant growth
        and high inflation (“stagflation”)
        
        Transition mechanism takes time so based on forecast
        
        Base rate changes impact economy by: affecting consumption of household, investment of firm sector. cost of gov borrowing, net exports of international sector
  - - - Economic Growth (GDP)
        
        GDP PPP
        
        Corrects for Purchasing Power (standard of living)
        
        GDP deflator includes movements in investment,
        government spending and net export prices (all the components of GDP).
        
        PPP GDP > nominal GDP, then, at actual exchange rate, goods and services are cheaper in that country
        compared with the US.
        
        Standard GDP better placed for economic 'clout'
        
        Crude measure of productivity is Per Capita GDP
      - Inflation / Deflation
      - Unemployment
        
        Male vs Female employment
        
        Female workforce steadily declining
        
        Types of unemployment: In between (Frictional), industries contract and expand (Structural)
      - Current Account Balance
- - - - Fiscal Policy -Lower G and/or higher Tax can have following effect
        
        Lower C, Lower I, Lower G and Lower X (as export prices rise to accommodate the tax increase) and so the economy slows down and a positive output gap is reduced.
      - Fiscal Policy -Higher G and/or lower Tax following effect
        
        Higher C, Higher I, Higher G and Higher X and so the economy picks up and a negative output gap is reduced.
    - - Consumer Price Index
    - - Base Interest Rate
        
        PBC (China) 3.850%
        
        FED (US) 0.250%
        
        UK 0.100%
        
        Inflation Rate Targeting
        
        Monetary Policy
        
        Tightened
        
        +ive output gap
        
        Inflation above target
        
        Raise base interest rate
        
        Firms with high gov borrowing, less likely to invest in new proj.
        
        1 more item...
        
        Consider demographic and employment when looking at consumption. Ie those most likely to spend (20s) less employed and less savings
        
        Gov borrowing more expensive, lower gov spend, less GDP
        
        1 more item...
        
        Loosened
        
        Reduce base interest rate
        
        -ive output gap
        
        Inflation below target
    - - Policy on Competition
        
        Deregulation
        
        Privatisation
      - Gov Outlay vs Revenue
        
        Fiscal Surplus or Deficit?
        
        Deficit financed by
        
        Gov Bonds
        
        Loans from IMF
        
        Is China member of IMF?
        
        Printing more money
        
        Inflationary
        
        Generally illegal
        
        Would devalue currency in exchange
        
        Gov Gross Financial Deficit compared as % of nominal GDP to analyse!
    - - increase base rate, increase demand and value currency
        
        Imports cheaper
        
        Inflation falls
        
        Exports more expensive
        
        Net export GDP falls, down pressure on inflation
  - - - Unpaid Work Not Measured
      - Cash in Hand Not Measured
    - - Central Bankers err on side of caution meaning % rate could be too high
        
        Monetary policy is now almost maxed-out so there is little ability to use it to support the economy if another shock happens