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Macro Economics: China (Essay Sample)

Write a 4-5 page paper, double-spaced, Arial 12pt font, 1 inch margins all around (top, bottom, left, and right) that addresses the following news event summarized below In a totally unexpected move, China's central bank announced that commercial banks must give them an additional 0.5% of deposits. But it was also done to help combat, meaning counteract the easing of monetary policy here in the US. And to help keep the Chinese currency from appreciating (rising) too much that it will slow down China's economic growth. FYI, the US and other world economies have been pushing China to let their currency rise. The fear by those economies and the US is that a continuing low-valued Chinese currency will make economic recovery tougher. So they'd like China to allow their currency to rise, slowing their economy down so the rest of the world can recover faster. However, China's reluctance to let their currency rise is something that's frustrated other world economies. China has said the Fed's recent easing monetary policy is pretty much a “de facto devaluation of the dollar.” In other words, without officially devaluing the dollar, the Fed has taken action that basically does just that. So in response, China has taken steps to tighten their monetary policy. In your papers, please address the following questions. And remember, your grade will be based upon the depth of your analysis! Exactly how will China's announcement saying banks need to hold more deposits with the central bank effect the balance sheets of both the banks and the Chinese Central Bank. This includes explaining the kind of reserves banks hold and which specific one(s) are involved here Explain the economic impact by the People's Central Bank on China's economy. How do you think it'll impact GDP and specifically why? Make sure you discuss the various components of GDP. And which one(s) you think will be effected and how. Also discuss the effect on equilbrium and aggregate expenses. Make sure you explain your reason(s) why. What impact will the Chinese Central Bank's decision have on the money multiplier? How will the spending and investment multipliers be effected? And what impact, if any, would you expect on MPS, MPC, APC, and APS? FYI, don't forget to explain what each of these is. How will China's announcement effect interest rates in China? And what impact will it have on aggregate demand and supply? Make sure you clearly explain how demand and/or supply will be effected. This way I can tell if you feel one or both are effected, and exactly how so. Important Notes: 1. Make sure you limit your paper's focus to the quesitions being asked 2. No outside resources may be used! You are not allowed to do things such as surf the net, use other books & resources, etc. 3. This is strictly individual work, not group! You are not permitted to work with others on this. You need to do your own work or it's considered cheating! 4. Bullets cannot be used! And graphs do not count towards the 4-5 pages! 5. No outside research! This means you must limit yourself to the news event here. So you cannot do more research into the event and/or China policy. You are limited to the info in the news event itself! 6. Do not include the questions in your paper! Your entire paper must be devoted entirely to answering the specific questions I'm asking. 7. Your entire paper must be written in paragraph form! So write it as if you were doing an English essay. 8. No quoting the book or other class materials! Everything must be in your own words. And because you are not permitted to quote others or do outside research, you won't need a page or section for citations. Your entire paper will be paragraphs answering my questions. source..

Macro Economics: China
(Your Name)
(Instructor`s Name)
(Institution/University, Date)
Macro Economics: China
Banks Need`s To Hold More Deposits With The Central Bank
China central bank have enforced on the rule that banks needs to have an additional 0.5% of their deposits to central bank. This was done with an aim of ensuring that the Chinese currency does maintain its value or appreciates further despite of wishes of the internal monetary control which wants to rise against international currencies such as United States Dollar which have been reducing its value over the recent years.
By ensuring that the Chinese currency does not appreciate it would slow the Chinese economic growth world. By slowing the Chinese currency to raise it would slow their economic growth and the other economies would subsequently recover much faster. However, China has been adamant on the rise of its currency which has really frustrated other world economies. They have actually taken tough measures although they are not amounting to devaluation of the dollar it will eventually devalue the Dollar. It has adopted tough monetary control by implementing a policy of banks depositing much of its money to the central bank.
The announcement of the Chinese central bank directives for the banks to hold more reserves to its deposit will affects the central bank and individual banks balance sheets. An increase of 0.5% of the bank`s deposits would reduce the respective balance sheets of the banks and increase the balance in central bank. This is because the banks will have to reduce the amount at their disposal by depositing much of it to the central bank. This will be aimed at reducing the amount in circulation.
The policy being implemented by Central bank is enforcing an increase on the amount which banks should deposit with it. This is commonly known as the cash reserve ratio or reserve requirement. This type of reserve is directed by Central Bank which provides standardized regulations to all commercial banks and they must be adhered to. This amount which is held by the bank cannot be lead to its customers and it is not involved in circulation such measures are meant to reduce the amount in circulation. Reserve ratio is used as a tool of monetary policy by central bank when it needs to control the amount of money which is deposable for circulations.
Such suctions will eventually reduce the amount in circulation which will have more impact on macro and micro economics and the economy of China. The China economy will be in a position to reduce on cases of inflations and prevent its economy to be struck by the financial crisis being experienced by other economies. By ensuring that the economy will not suffer inflations is a gua...
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