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Essay / Research Paper Abstract
This 3-page paper uses the DD-AA model to determine how China is managing to grow, compared to other economies. The paper also discusses what happens if China uses a floating rate currency. Bibliography lists 2 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTchininvt.rtf
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Unformatted sample text from the term paper:
investment in factories and equipment, as well as foreign investment in factories and equipment. There has been a great deal of foreign investment interest in China during the past several
years. Well attempt to use a DD-AA framework to determine the impact of foreign economies on Chinese growth. Before we go any
further, however, lets offer a short explanation of the DD-AA model. The DD-AA model determines the output versus exchange rate (Kasa, 2008).
In this particular model, the DD curve signifies combinations of exchange rates and output that end up clearing the market for goods and services (Kasa, 2008).
The AA side, in the meantime, represents the combinations of exchange rates and output that clear asset markets, such as the money and foreign exchange
markets (Kasa, 2008). Shifts in price level, money supply, government spending, foreign investment rate and expectations of future exchange rates have an impact on these curves. So while DD focuses
on goods and services coming to the market, the AA side deals more with the assets used to buy these goods and services.
With the above explanation in mind, lets take a look at the graph below.
Though Chinese growth might seem strong, based on whats going on with this country versus others, its also fairly well-known that China pegs its
exchange rate to keep the yuan weak against the US dollar (Brown, 2007). What this does, therefore, is suggest that Chinese economic output is higher than it would be if
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