What kind of CPI do we need?

Cheap and good, this is what everyone wants in real life. The decline in prices is indeed beneficial to residents' lives to a certain extent, because residents can buy more in the same currency. So is the lower the price, the better? On September 7, Liaoning citizens in Liaoning bought eggs in the supermarket. According to data released by the Ministry of Commerce on September 6, from August 29 to September 2 (the week), the national egg retail price rose by 1% in the week compared with the previous week. The CPI is not as low as the overall price level is long-term, large-scale decline, which will lead to excessive deflation, market monetary tightening, limit the effective growth of social demand, and ultimately lead to weak economic growth, economic growth rate decline from the history of China and foreign countries The long-term and large-scale decline in the overall price level will lead to excessive deflation, tighter market capitalization, slower currency circulation, weak market sales, affecting the enthusiasm of enterprises for production and investment, and strengthening residents’ “buy up and not buy” Psychology, causing enterprises to "feel the investment", residents "reluctant purchase" and a large amount of idle funds, thereby limiting the effective growth of social demand, ultimately leading to weak economic growth, economic growth rate decline, long-term economic development and the long-term interests of the people Unfavorable, causing the national economy to stagnate or even decline. Generally speaking, the macroeconomic fundamentals of an economy are mainly determined by the speed of economic growth, the degree of inflation, the employment situation, and the international balance of payments. The main direction of macroeconomic regulation and control is to strive to maintain a reasonable growth rate of the economy and maintain basic prices. Stable, good employment, and a balanced balance of payments. Among them, the relationship between economic growth rate and inflation is the closest. The relationship between economic growth and inflation has the following four situations: high growth and low inflation, high growth and high inflation, low growth and low inflation, low growth and high inflation. Under the macro-control, these four situations tend to change alternately. High growth and low inflation. The main feature is that the rapid growth of GDP and the low level of CPI coexist, indicating that the macro economy is on the track of benign operation. This is the most important economic goal pursued by the society and the “golden growth period” of the economy. High growth and high inflation. The main feature is that the rapid growth of GDP coexists with the high CPI operation. Due to the rapid economic growth, national income has increased substantially, and social demand has grown rapidly. In this case, it is prone to price increases and inflation. At this time, due to the high-speed operation of the economy, even if inflationary pressures are high, the overall social pressure is not great. However, if the distribution is unfair, it is easy for the poor to subsidize the rich, which will lead to a series of social problems. Low growth and low inflation. The main feature is that GDP growth is slow or even negative, while CPI is also in a low operating state. Under normal circumstances, economic growth is slow, and national income growth is slow, and social demand is reduced, which causes product prices to fall and CPI to decrease. Promoting economic growth has become the primary goal of society as a whole, and appropriate inflation policies can be adopted to stimulate production. The government will adopt expansionary policies to stimulate economic growth. Low growth and high inflation. That is, the economy stagnates inflation, commonly known as "stagflation." The main feature is that GDP growth is relatively slow or even negative growth, but at the same time the price increase is accelerated, and the inflation rate generally exceeds 5% or even higher. Stagflation is more terrible than pure inflation and more destructive to a society. High growth and low inflation are ideal. The economic growth rate is higher than the inflation rate. Such economic growth is healthy and benign. If China's economy maintains a growth rate of 8% to 10%, the inflation rate of 3% to 5% should be reasonable. Experts pointed out that China's current economy is in a period of rapid growth and rapid economic restructuring, and a lower CPI is not conducive to economic growth. If the policy of tightening the long-term austerity in order to stabilize prices and control the growth of CPI, it will often cause price distortions, and the austerity policy will easily form a “one size fits all” in actual operation, which will easily have a greater negative impact on the production enthusiasm of SMEs. It will also have a inhibitory effect on the total supply of society, so the CPI is not as low as possible. If the CPI is negative, deflation is formed, and the negative effect on economic growth is even greater than inflation. This is because the continued decline in prices will lead to a decline in corporate profits and a rise in product backlogs, resulting in a reduction in employment opportunities, a decline in household income, and a lack of market consumption, which in turn will plunge the entire national economic system into a vicious circle of mutual restraint. And when moderate deflation develops into a deflationary deflation, it usually means that the economy will experience a recession. At the same time, an appropriate price increase can promote technological innovation and expand reproduction of enterprises, and can also achieve a relatively balanced profit between enterprises and industries, maintain stable economic development, and create a "golden" development situation of high growth and low inflation. Therefore, for CPI, we do not want it to rise too high, but do not want it to continue to decline, but hope to maintain a moderately moderate trend to ensure the long-term healthy and stable development of the national economy. At present, China's economy has the risk of shifting from high growth and low inflation to high growth and high inflation. Therefore, it is necessary to continue to place stable prices at the forefront of macroeconomic regulation and control, and strive to return the national economy to the ideal situation of high growth and low inflation. Yao Jingyuan, former chief economist of the National Bureau of Statistics and special researcher of the State Council Counselor's Office, believes that economic growth means increased demand, and increased demand will inevitably raise prices when supply remains unchanged. In any economy in the world, as long as the economy is growing, prices are definitely going up. If the income growth of residents and the growth of national economy are synchronized, the increase in labor compensation and the increase in labor productivity are synchronized, and the economic growth rate is higher than the inflation rate. Such economic growth is healthy and benign. Under such conditions, prices will rise. The trend is also normal. Therefore, if China's economy maintains a growth rate of 8% to 10%, the inflation rate of 3% to 5% should be reasonable. Increase the protection of low-income groups According to the linkage mechanism of social assistance and protection standards linked to rising prices, short-term price increases will provide temporary price subsidies to the needy, and continuous price increases will raise social assistance and security standards. The CPI is too high, and the price increase is too large, which will have a greater impact on low-income groups. Because low-income people have low consumption levels and narrow consumption, their income is mainly used for eating, wearing, medical care and children's education, and their ability to withstand rising prices is low. Therefore, the government should put stable prices at the forefront of macroeconomic regulation and control, while controlling the excessive rise in prices, pay special attention to increasing the support for low-income groups. According to the Notice of the National Development and Reform Commission and other departments on the establishment of a linkage mechanism for social assistance and protection standards linked to rising prices, short-term price increases will provide temporary price subsidies to the needy, and continued price increases will boost social assistance. And security standards. The subsidy standard should ensure that the actual impact of rising prices on the lives of low-income groups is not lower. As of the end of August, among the 31 provinces (autonomous regions and municipalities), Beijing, Tianjin, Jilin, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi, Shandong, Hubei, Hunan, Guangdong, Hainan, Guizhou, Shaanxi, Ningxia, Qinghai, Hebei, 27 provinces, autonomous regions, such as Shanxi, Liaoning, Sichuan, Shanghai, Xinjiang, Guangxi, Yunnan, Inner Mongolia, and Henan, have launched a linkage mechanism linking social assistance and security standards to price increases. The relevant person in charge of the National Development and Reform Commission said that the original plans for 31 provinces and municipalities to establish a price linkage mechanism before the end of the year, now have to be established before October. The relevant person in charge of the National Bureau of Statistics also said that the statistics department is studying the price survey of the basic living expenses of low-income residents in urban areas. The survey will timely and accurately reflect the impact of changes in the prices of major consumer goods and services on the basic living of urban low-income residents.

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