Evangel's IB Economics Blog

Appreciation in the Chinese yuan (Picture by AsiaNews.it)

The article, “China Raises Reserve Ratio to Curb Inflation as Zhou Pledges More to Come” from Bloomberg news, talks about the challenges the Chinese policy makers are facing. While reading the article, I came across some words that I thought was crucial to know in order to understand fully.

1. Inflation is a rise in the general price level. This means that the value of money has fallen.
2. Monetary tightening is a course of action undertaken by the Federal Reserve to constrict spending in an economy that is seen to be growing too quickly, or to curb inflation when it is rising too fast.
3. Reserve ratio is the portion (expressed as a percent) of depositors’ balances banks must have on hand as cash.
4. Interest rate is the reward for giving up use of money and is an amount paid to a lender over and above original sum borrowed.
5. Appreciation is an increase in monetary value.
6. Imported inflation is an inflation due to increases in the prices of imports.
7. Stocks are raw materials, work in progress and unsold consumer goods that are held by the firm ready for production of sale.
8. Gross domestic product (GDP) is a measure of the level of economic activity within a country in other words a measure of national income.
9. Monetary policy is the use of changes in the supply of money and interest rates to achieve economic policy targets.
10. Swaps market is a market in which a borrower with one type of loan exchanges it with another borrower with a different type of loan.