Economics Questions and Answers 2022

Running head: ECONOMICS 1
Economics assignment
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ECONOMICS 2
Question one
The type of Business cycle the economy is currently in is a Contraction cycle.
GDP and employment are key indicators focused on while measuring a
business cycle (Sheetz, 2018). In this case, it is clear that the overall levels
of real GDP growth rates, inflation and employment are declining. A
contraction is characterized by slowing down of business for purposes of
ensuring that there is an overall normal maintenance. This phrase if not
properly managed some time results into a trough (Orange, 2018).
Question two
China is likely to be hugely affected by its trade war with the US. An
imposition of tariffs on all Chinese imports by the US will mean that there will
be a general decline in the demand of the Chinese goods and services
(Broadman, 2018). The overall Chinese economic output is likely to fall by
1.6 percent due to the trade war. It is clear that as per the moment, a twenty
five tariff (25%) has been imposed on Chinese imports worth US$200billion
(Swanson, 2018). And all Chinese imports are likely to suffer high tariff
imposition by the US due to this trade war. There is likely to be reduction in
producer surplus due to the increased tariff. Also, output will reduce due to
declining prices in china and high prices in the US. Generally fixed costs and
payments, employments and profits among Chinese producers will decline.

ECONOMICS 3
Thus the effects are likely to be felt in the production side (Coglianese et al,
2017).
Figure 1 showing how a trade war with the US will impact on China’s
GDP
Basing on the diagram above, imposition of relatively high tariffs on china’s
imports by the United States Government, will affect producer confidence
leading to a decline in the level of output, profits, prices and employment
leading to a fall in the GDP of china (Mankiw, 2014).
How the middle class can rescue china
Figure 2 showing how the middle class can come to the rescue of china