1) Select a Macro Economy to Study. It Could Be the Us, Japan, Germany or the Uk or the Economy of Your Own Country. Using the Websites Below ( and Others You Can Find) Assess the Past and Current Performance and Future

China is one the countries that is experiencing the world’s fastest economic growth now. Its integration into the global economy has been developed dramatically. China’s GDP growth is almost 8 percent on average. It is currently expanding in a significant pace and it is being questioned if it will overtake U.S. to become the biggest economy in the world. However, whether China’s growth can be sustained, we must consider how the macroeconomic indicators such as inflation and balance of payment, changes in different periods. Most importantly, the Chinese government should implement the most appropriate strategy to encounter unexpected economic shocks in order to reduce the vulnerability of business and ensure a steady economic growth.

In February 2008, the inflation in China hits 11-year high- at 7.1%. The reason behind this high inflation rate is the soaring food prices. This is known as cost-push inflation. The extreme weather condition in China had adversely disrupted the supply of food. To encounter the rise in inflation, the Chinese government had raised the interest rates by six times < http://news.bbc.co.uk/1/hi/business/7252010.stm > However, not everyone agrees. Some argued that demand-pull inflation was the cause. This is because the food supplies disruption caused by blue-ear disease on pigs in China was more severe than the disruption caused by extreme weather conditions. In other words, it is the demand for food increases, rather the supply of food decreases. Chinese households become wealthier and due to the fact that food is a necessity, the spending on food increases and lead to demand pull inflation. < http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=478048&story_id=17851541 >

In January 2011, the inflation rate is 5.1%, which was over the government’s 3% target. However, the interest rate was kept low in order to prevent bubble economy from bursting. The problem with lower interest rate is that borrowers might...