Inflation and Its Effects on the GDP of the United States Compared to China

The articles are talking about Inflation and the effects of it on the GDP of the United States compared to China. The first article is called “Catching the Eagle”. In December 2010, the Economist introduced a chart that made prediction of when China’s economy will overtake America’s economy. When the chart was first introduced in 2010, the Economist included a set of default assumptions for the decade ahead. They assumed that growth would average 7.75% in China over the subsequent ten years and 2.5% in America. Moreover, the data assumed that inflation would average 4% in China and 1.5% in America over the same period. The Yuan, could strengthen by 3% a year. Based on a combination of assumptions, China would overtake the US as early as 2019. It was likely that China’s growth would outpace the average at the beginning of the decade and fall below at the end. In the US, growth was a little lower than what was expected but inflations was a little bit higher. In addition, the actual GDP figure for 2010 turned out to be higher in both countries than what the Economist had estimated when making its projections. Briefly, China’s growth would have to average 7.1% by the end of the decade, and US growth would be 2.4% by the end of the decade. Over the same period, inflation would be 4% a year in China and just over 1.4% in America. Finally, the Yuan would have to appreciate by 2.9% a year on average against the US dollar.

The second article is called “The dating game”, and it also talks about inflation and its effect on GDP between the US and China. The US GDP is roughly twice as big as China’s. Over the past ten years, real GDP growth averaged 10.5% a year in China and 1.6% in the US; inflation, as measured by the GDP deflator, averaged 4.3% and 2.2% respectively. The Yuan has risen by an annual average of just over 4%. The Economists best guess for the next decade is that annual GDP growth averages 7.75% in China and 2.5% in the US, inflation rates average 4%

Cited: S.C. and D.H. "Catching the Eagle." The Economist. The Economist Newspaper, 21 Nov. 2013. Web. 20 Apr. 2014. The Economist Online. "The Dating Game." The Economist. The Economist Newspaper, 27 Dec. 2011. Web. 20 Apr. 2014.