Aggregate Demand and Relative Prices

Chris Bramall

in Sources of Chinese Economic Growth, 1978-1996

Published in print September 2000 | ISBN: 9780198296973
Published online November 2003 | e-ISBN: 9780191596018 | DOI:

Series: Studies on Contemporary China

Aggregate Demand and Relative Prices

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One of the key reasons for China's success in mobilizing resources and raising productivity since 1978 has been the regulation of aggregate demand by central government. More precisely, as this chapter shows, the increase in demand that occurred at the start of the 1980s caused an acceleration in the growth rate. This macroeconomic policy was supplemented by a dramatic increase in the relative price of agricultural products in 1979. This altered the intersectoral terms of trade, thereby creating a surplus within the agricultural sector for re‐investment and––because farm production became profitable for the first time in almost a decade––provided a direct incentive for farmers to maximize output.

Keywords: agricultural; demand; incentive; intersectoral; macroeconomic; policy; prices; surplus

Chapter.  11382 words. 

Subjects: Economic Development and Growth

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