Macroeconomics annotation Essay Example | Topics and Well Written Essays - 500 words

Macroeconomics annotation - Essay Examplehe lost in the chinas stock market by about three-fifths of its value, the decision-making body believes that the loosening monetary policy is appropriate. The Chinas central bank, Peoples Bank of China reflects the decision-making bodys tie in and aim for the change in policy.The articles primary economic element is the heavy of the pertain rate in the economy. This dour of the benchmark intimacy rate has an effect on the countrys monetary policy and money supply. According to Bradsher in the article, effective Tuesday, the Peoples Bank of China lowered by 0.27 percent, to 7.2 percent, the regulated benchmark rate that commercial banks may charge for one-year loans to business borrowers with strong credit histories. Rates for shorter-term loans will be generally cut even more while grade for longer-term loans will be subject to smaller adjustments, the central bank said, without providing details (September 2008). By lowering the inter est rate, the central bank aims to signal to commercial banks to lower the lending rate. By lowering the lending rate, the country aims to make funds more hearty to business borrowers.In figure 1.1, Chinas benchmark rate is lowered. The interest rate aims to lower the money supply in the country. By lowering the money supply coupled with less stringent limits on lending, Chinas Politburo aims to protect the country from the global economic downturn.By lowering the interest rate, China aims to signal commercial banks to lower down their lending rate which makes the cost of accessing financing lower. As is shown in figure 1.2 and 1.3, lowering the interest rates lower the costs to financing, which increases the investments in an economy.This increase in investments due to lower costs of financing that is brought by this change in monetary policy does not increase proportionately in the economy. Figure 1.4 shows the effect of the increase in investment in the economy. Because