Monday, April 09, 2012

Food Prices Push Rate of Inflation Up in China

With all of the emerging economies in the world, China has received much of the media’s attention. According to a New York Times article, China is in high inflation for food, gas, and housing markets. What causes inflation is too much money is floating around in a nation mixed in with natural disasters and very high growth levels. This is China’s problem. Right now china is looking for ways to control the level of growth in the country, through policy. China has some help right now because of the economic instability of the European Union.

To control inflation, China will have to institute some sort of contractionary policy that will absorb some of the circulating money. (One method that the U.S. uses is to sell bonds and treasuries) To slow growth down, however China has to incorporated restraints on their exporting and importing of goods and is debating on how much to reduce the rate of funds supplied to lenders. A possible problem when it comes to adjusting to these new policies, as least when dealing with inflation, is getting a clear picture of the economy when looking at the indexes.

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