I. Recently there have been several news talking about the slowdown of productio
ID: 1241736 • Letter: I
Question
I. Recently there have been several news talking about the slowdown of production (and productivity) in south-east Asia (especially China). Answer the following questions under the following assumptions: there are only two regions in the world; the U.S and China, the U.S. is net importer (therefore is more sensitive to changes in its imports), China is net exporter (therefore is more sensitive to changes in its exports), both countries are of similar economic size and also assume there is an important decrease in production in China but that this decrease doesnExplanation / Answer
A decrease in production will result in decrease in the quantity of trade happening between the two countries. This will result in the decline in trades of China with the US. Now as the production declines this will result in loss of jobs again since it is an export driven economy this will result in loss in GDP as well as consumption. In the U.S, the decline in production from outside will result in increase in the production from domestic industries producing more of goods resulting in increasing employment opportunities, GDP and consumption as the import decline. b. When China starts fiscal spending this will result in the increase in the government spending to promote industries and boost the economy of china by spending on infrastrucutre creating job opportunities as well as resulting in increase in GDP. I hope this helps. Please do rate me. :)