153k views
1 vote
What is the effect on​ China's aggregate demand when the United States goes into​ recession, when Japanese and European firms establish new plants in​ China, or when the Chinese yuan strengthens against the U.S.​ dollar?

User Snick
by
4.7k points

1 Answer

3 votes

Answer:

When the United States goes into recession - China's aggregate demand suffers greatly, meaning that it is reduced. This is because China is an important exporter of goods to the United States, so the exports element of Aggregate Demand will fall, bringing down Aggregate Demand as a whole.

When Japanese and European firms establish new plants in​ China - Chinese aggregate demand increases because more private investment from abroad arrives in the country, not only benefiting the Japanese owners, but also Chinese workers in the form of wages, Chinese companies in the form of more domestic consumption, and the Chinese government in the form of more tax revenue.

when the Chinese yuan strengthens against the U.S.​ dollar? - Aggregate demand will probably fall because a stronger yuan will decrease Chinese exprots, and increase American imports to China, and imports are not part of the Aggregate Demand calculation.

User Bidhan
by
5.2k points