国际经济英语194

Unit1

FundamentalsofEconomicsWhatIsEconomics?Exploresthebehaviorofthefinancialmarkets,includinginterestratesandstockprices.Examinesthereasonswhysomepeopleorcountrieshavehighincomeswhileothersarepoorandsuggestswaysthatincomesofthepoorcanberaisedwithoutharmingtheeconomy.Studiesbusinesscyclestheupsanddownsofunemploymentandinflationalongwithpoliciestomoderatethem.WhatIsEconomics?Studiesinternationaltradeandfinanceandtheimpactsofglobalization.Looksatgrowthindevelopingcountriesandproposeswaystoencouragetheefficientuseofresources.Askshowgovernmentpoliciescanbeusedtopursueimportantgoalssuchasrapideconomicgrowth,efficientuseofresources,fullemployment,pricestability,andafairdistributionofincome.DefinitionofEconomics

Economicsisthestudyofhowsocietiesusescarceresourcestoproducevaluablecommoditiesanddistributethemamongdifferentpeople.Behindthisdefinitionaretwokeyideasineconomics:thatgoodsarescarceandthatsocietymustuseitsresourcesefficiently.ScarcityandEfficiency

TheTwinThemesofEconomicsScarcitymeansthatsocietyhaslimitedresourcesandthereforecannotproduceallthegoodsandservicespeoplewishtohave.Efficiencydenotesthemosteffectiveuseofasociety’sresourcesinsatisfyingpeople’swantsandneeds.FactorsofProduction1.

Land.

Land

encompasses

all

the

nonhuman

gifts

of

nature,

including

timber,

water,

fish,

minerals,andtheoriginalfertilityofland.2.

Labor.

Labor

is

the

human

resource,

which

includes

productive

contributions

made

byindividualswhowork,suchasWebpagedesigners,iPadapplicationscreators,andprofessionofallfootballplayers.3.

Physical

capital.

Physical

capital

consists

of

the

factories

and

equipment

used

inproduction.

.

FactorsofProduction4.

Human

capital.Humancapitalistheeconomiccharacterizationoftheeducationandtrainingofworkers.5.Entrepreneurship.Entrepreneurship(actuallyasubdivisionoflabor)isthecomponentofhumanresourcesthatperformsthefunctionsoforganizing,managing,andassemblingtheotherfactorsofproductiontocreateandoperatebusinessventures.Micro-EconomicsandMacro-Economicsvideointroduction/economics/What-Is-Microeconomics-.htm/economics/What-Is-Macroeconomics-.htmMicroeconomicsConsumerdecisionmakingandutilitymaximizationFirmproductionandprofitmaximizationIndividualmarketequilibriumEffectsofgovernmentregulationonindividualmarketsExternalitiesandothermarketsideeffectsMacroeconomicsTheeffectsofgeneraltaxessuchasincomeandsalestaxesonoutputandpricesThecausesofeconomicupswingsanddownturnsTheeffectsofmonetaryandfiscalpolicyoneconomichealthHowinterestratesaredeterminedWhysomeeconomiesgrowfasterthanothersTheRelationshipBetweenMicroeconomicsandMacroeconomicsThereisanobviousrelationshipbetweenmicroeconomicsandmacroeconomicsinthataggregateproductionandconsumptionlevelsaretheresultofchoicesmadebyindividualhouseholdsandfirms,andsomemacroeconomicmodelsexplicitlymakethisconnection.TheRelationshipBetweenMicroeconomicsandMacroeconomicsMostoftheeconomictopicscoveredontelevisionandinnewspapersareofthemacroeconomicvariety,butit’simportanttorememberthateconomicsisaboutmorethanjusttryingtofigureoutwhentheeconomyisgoingtoimproveandwhattheFedisdoingwithinterestrates.AdamSmithAdamSmithandHisworksAdamSmithAdamSmithisoftendescribedasthe"foundingfatherofeconomics".AgreatdealofwhatisnowconsideredstandardtheoryaboutthetheoryaboutmarketswasdevelopedbyAdamSmith.Twobooks,TheoryofMoralSentimentsandAnInquiryintotheNatureandCausesoftheWealthofNationsareofgreatimportance.AnInquiryintotheNatureandCausesoftheWealthofNationsAnInquiryintotheNatureandCausesoftheWealthofNations,(generallyreferredtobyitsshortenedtitleTheWealthofNations),isthemagnumopusoftheScottisheconomistandmoralphilosopherAdamSmith.Firstpublishedin1776,thebookoffersoneoftheworld'sfirstcollecteddescriptionsofwhatbuildsnations'wealthandistodayafundamentalworkinclassicaleconomics.ThroughreflectionovertheeconomicsatthebeginningoftheIndustrialRevolutionthebooktouchesuponbroadtopicsasthedivisionoflabour,productivityandfreemarkets.TheFirstVersionoftheWealthofNationsQuestions:Whatisthecorrelationbetweenscarcityandefficiency？Whatfactorsmayaffecttheeconomicefficiency?Unit2

BasicElementsofDemandandSupplyDemandvs.SupplyDemandistherelationshipbetweenthequantityofagoodorserviceconsumerswillpurchaseandthepricechargedforthatgood.Supplyistherelationshipbetweenthequantityofagoodorserviceconsumerswillofferforsaleandthepricechargedforthatgood.DemandCurveThelawofdemandstatesthat,allelsebeingequal,thequantitydemandedofanitemdecreasesasthepriceincreasesandviceversa.The“allelsebeingequal”partisimportanthere,sinceitmeansthatindividuals’incomes,thepricesofrelatedgoods,tastes,etc.areallheldconstantandonlythepriceischanging.DemandCurveThevastmajorityofgoodsandservicesobeythelawofdemand,iffornootherreasonthanfewerpeopleareabletopurchaseanitemwhenitbecomesmoreexpensive.Graphically,thismeansthatthedemandcurvehasanegativeslope,i.e.slopesdownandtotheright.(Notethatthedemandcurvedoesn’thavetobeastraightline,butit’susuallydrawnthatwayforsimplicity.)DemandCurveInthisexample,wecanstartbyplottingthepointsinthedemandscheduleontheleft.Therestofthedemandcurvecanbeformedbyplottingtheapplicableprice/quantitypairsateverypossiblepricepoint.TheSlopeoftheDemandCurveSinceslopeisdefinedasthechangeinthevariableonthey-axisdividedbythechangeinthevariableonthex-axis,theslopeofthedemandcurveequalsthechangeinpricedividedbythechangeinquantity.Betweenthetwopointslabeledabove,theslopeis(4-8)/(4-2),or-2.(Noteagainthattheslopeisnegativebecausethecurveslopesdownandtotheright.)Sincethisdemandcurveisastraightline,theslopeofthecurveisthesameatallpoints.AChangeinQuantityDemandedAmovementfromonepointtoanotheralongthesamedemandcurve,asillustratedabove,isreferredtoasa"changeinquantitydemanded."Changesinquantitydemandedaretheresultofchangesinprice.SupplyandDemandEquilibriumInthesupplyanddemandmodel,theequilibriumpriceandquantityinamarketislocatedattheintersectionofthemarketsupplyandmarketdemandcurves.NotethattheequilibriumpriceisgenerallyreferredtoasP*andthemarketquantityisgenerallyreferredtoasQ*.MarketForcesResultinEconomicEquilibriumIfthepriceinamarketislowerthanP*,thequantitydemandedbyconsumerswillbelargerthanthequantitysuppliedbyproducers.Ashortagewillthereforeresult,andthesizeoftheshortageisgivenbythequantitydemandedatthatpriceminusthequantitysuppliedatthatprice.Producerswillnoticethisshortage,andthenexttimetheyhavetheopportunitytomakeproductiondecisionstheywillincreasetheiroutputquantityandsetahigherpricefortheirproducts.Aslongasashortageremains,producerswillcontinuetoadjustinthisway,bringingthemarkettotheequilibriumpriceandquantityattheintersectionofsupplyanddemand.EconomistsBreakDowntheDeterminantsofanIndividual'sDemandintoFiveCategories:PriceIncomePricesofRelatedGoodsTastesExpectationsEconomistsBreakDowntheDeterminantsofaFirm'sSupplyintoFourCategories:PriceInputPricesTechnologyExpectationsTheConditionforMarketEquilibriumIngeneral,theconditionforequilibriuminamarketisthatthequantitysuppliedisequaltothequantitydemanded.ThisequilibriumidentitydeterminesthemarketpriceP*,sincequantitysuppliedandquantitydemandedarebothfunctionsofprice.ApplicationsofSupplyandDemand--elasicityVideomaterial/economics/Price-Elasticity-of-Demand.htmPriceElasticityofDemandHowDoWeInterpretthePriceElasticityofSupply?Thepriceelasticityofsupplyisusedtoseehowsensitivethesupplyofagoodistoapricechange.Thehigherthepriceelasticity,themoresensitiveproducersandsellersaretopricechanges.Averyhighpriceelasticitysuggeststhatwhenthepriceofagoodgoesup,sellerswillsupplyagreatdeallessofthegoodandwhenthepriceofthatgoodgoesdown,sellerswillsupplyagreatdealmore.Averylowpriceelasticityimpliesjusttheopposite,thatchangesinpricehavelittleinfluenceonsupply.QuestionInyourcommonsense,whatisthemajorfactorthatpeopleconsiderwhenbuyingcommodities?Whatistherelationshipbetweenpriceandquantitydemanded?Unit3

Consumption

OnDemand——DeterminantsofDemandDemandisthenafunctionofthesefivecategories.Let'slookmorecloselyateachofthedeterminantsofdemand.1.PriceasdeterminantofdemandDeterminantsofDemand2.IncomeasdeterminantofdemandDeterminantsofDemand4.Tastesasadeterminantofdemand3.PricesofrelatedgoodsasdeterminantsofdemandDeterminantsofDemand5.ExpectationsasaDeterminantofDemandToday‘sdemandcanalsodependonconsumers’expectationsoffutureprices,incomes,pricesofrelatedgoods,andsoon.Forexample,consumersdemandmoreofanitemtodayiftheyexpectthepricetoincreaseincreaseinthefuture.Similarly,peoplewhoexpecttheirincomestoincreaseinthefuturewilloftenincreasetheirconsumptiontoday.DeterminantsofDemand6.NumberofbuyersasadeterminantofmarketdemandUtilityUtilityistheeconomist'swayofmeasuringpleasureorhappinessandhowitrelatestothedecisionsthatpeoplemake.Utilitymeasuresthebenefits(ordrawbacks)fromconsumingagoodorserviceorfromworking.Althoughutilityisnotdirectlymeasurable,itcanbeinferredfromthedecisionsthatpeoplemake.UtilityMaximizationEconomistsarealwaysmakingassumptionsaboutpeople'sbehavior.Oneassumptionthatseemstomakesenseisthatpeopletrytomakethemselvesashappyaspossible.Ineconomics-speak,thisiscalledutilitymaximization.

DiminishingMarginal

UtilityIfyouhaveeveroverindulgedoncandy,cookies,brownies,oricecream,youknowthatatfirsttheeatingwasenjoyable,butafterafew(oradozen),youwerenotquiteashappyaswhenyoustarted.Economistsrefertothisphenomenonasdiminishingmarginalutility.Individualvs.MarketDemandBecausemarketdemandisderivedfromindividualdemands,itdependsonallthosefactorsthatdeterminethedemandofindividualbuyers.Themarketdemandisthesumofthetwoindividualdemands.IncomeElasticity

Incomeelasticityofdemandisusedtoseehowsensitivethedemandforagoodistoanincomechange.Thehighertheincomeelasticity,themoresensitivedemandforagoodistoincomechanges.Averyhighincomeelasticitysuggeststhatwhenaconsumer'sincomegoesup,consumerswillbuyagreatdealmoreofthatgood.Averylowpriceelasticityimpliesjusttheopposite,thatchangesinaconsumer'sincomehaslittleinfluenceondemand.TheSubstitutionEffectandtheIncomeEffect

Thesubstitutioneffectstatesthatconsumersdemandlessofagoodwhenitgoesupinpriceandviceversa.Theincomeeffect,ontheotherhand,isabitmorecomplex,sincenotallgoodsrespondthesamewaytochangesinincome.SubstitutionandIncomeEffectSubstitutionandIncomeEffectThetableabovesummarizesthesubstitutionandincomeeffectsaswellastheoveralleffectofapricechangeonthequantitydemandedofagood.Whenagoodisanormalgood,thesubstitutionandincomeeffectsmoveinthesamedirectionandtheoveralleffectofapricechangeonquantitydemandedisunambiguous(andintheexpecteddirectionforadownward-slopingdemandcurve).Whenagoodisaninferiorgood,however,thesubstitutionandincomeeffectsmoveinoppositedirections,whichmakestheeffectofapricechangeonquantitydemandedambiguous.ElasticDemandElasticdemand,whichiswhenthequantitydemandedchangesmorethanthepricedoes.

InelasticDemandThequantitydemandedbybuyersdoesn'tchangeasmuchasthepricedoes.ExampleofElasticDemandAgoodexampleofelasticdemandishousing.True,peopleneedtolivesomewhere,buttheyhavemanychoices:townhome,condo,apartmentorlivewithfriendsorfamily.However,demandforhousingin2006wasartificiallystimulatedbylow-costmortgages.Eventhoughhomesalepricesrose,thecostofqualifyingforamortgagewasdramaticallylowered.Interestratesplummetedbecausenewtypesofexoticloanswereinvented.Interestratesonadjustablerateloanswerelowerthanthoseforfixed-rateloans.Then,wheninterestratesstartedtorise,bankscreatedinterest-onlyloans,andevennegativeamortizationloans.Theseloanswereactuallymoreexpensiveinthelongrun,buttheyhadlowmonthlyfeesintheshortrun.Inaddition,manyfamilieswhodidn'tthinktheycouldeverbeahomeownerweretoldtheycouldqualifyforloans.Asaresult,demandskyrocketed,creatinganassetbubble.ExamplesofInelasticDemandInreallifethereisnoexampleofsomethingwherethedemandisperfectlyinelastic.Theonlythingthatwouldcomeclosewouldbeifsomeonemanagedtoownalltheair,orallthewater,onEarth.Thereisnosubstituteforeither,andpeoplehavetohaveairandwaterortheydieinashortperiodoftime.However,eventhat'snotperfectlyinelastic,becausethesuppliercouldn'tcharge100%oftheincomeintheworld.Peoplewouldstillneedsomemoneyforfood,ortheywouldstarvewithinafewweeks.Therefore,it'shardtoimagineasituationthatwouldtrulycreateperfectlyinelasticdemand.QuestionsWhatwillsubstitutionandincomeeffectdotocommodity?Howdoesthemarketdemandgraduallybeingconstructed?Unit4

ProductionTheCostsofProductionIneconomicterms,thetruecostofsomethingiswhatonehastogiveupinordertogetit.Thisincludesexplicitmonetarycostsofcourse,butitalsoincludesimplicitnon-monetarycostssuchasthecostofone'stime,effort,andforegonealternatives.Therefore,reportedeconomiccostsareall-inclusiveopportunitycosts,whicharethesumsofexplicitandimplicitcosts.TotalCostTotalcost,notsurprisingly,isjusttheall-inclusivecostofproducingagivenquantityofoutput.Mathematicallyspeaking,totalcostisafunctionofquantity.FixedandVariableCostsFixedcostsareupfrontcoststhatdon'tchangedependingonthequantityofoutputproduced.Variablecosts,ontheotherhand,arecoststhatdochangedependingonhowmuchoutputthefirmproduces.(labor,material,etc.)AverageCostsSometimesit'shelpfultothinkaboutper-unitcostsratherthantotalcosts.Toconvertatotalcostintoanaverageorper-unitcost,wecansimplydividetherelevanttotalcostbythequantityofoutputbeingproduced.Aswithtotalcost,averagecostisequaltothesumofaveragefixedcostandaveragevariablecost.MarginalCostsMarginalcostdenotestheextraoradditionalcostofproducing1extraunitofoutput.Forexample,ifthetotalcostofproducing3unitsofoutputis$15andthetotalcostofproducing4unitsofoutputis$17,themarginalcostofthe4thunit(orthemarginalcostassociatedwithgoingfrom3to4units)isjust($17-$15)/(4-3)=$2.MonopolyAmonopolyissimplyamarketwithonlyonesellerandnoclosesubstitutesforthatseller'sproduct.Technically,theterm"monopoly"issupposedtorefertothemarketitself,butit'sbecomecommonforthesinglesellerinthemarkettoalsobereferredtoasamonopoly(ratherthanashavingamonopolyonamarket).MonopolyPriceDiscriminationBecausetheylackcompetition,monopoliescanengageinpricediscriminationtomakeitdifficultforotherfirmstodobusiness.Pricediscriminationistheabilitytochargedifferentcustomersdifferentpricesforthesamegoodorservice.Forexample,arailroadmonopolistcouldchargedifferentratestodifferentcustomersforcarryingthesameamountoffreight.Today,thankstotheClaytonAntitrustAct,pricediscriminationforthemostpartisillegal.OligopolyOligopolydescribesamarketwhereafewlargeproducersdominate.Unlikecompetitiveandmonopolisticallycompetitivemarkets,oligopolisticfirmshavemorepricingpower.Thetermoligopolymeans"fewsellers.”Theimportantfeatureofoligopolyisthateachindividualfirmcanaffectthemarketprice.ExamplesofOligopolyIndustrieswhichareexamplesofoligopoliesinclude:SteelindustryAluminumFilmTelevisionCellphoneGasTheFormsofBusinessOrganizationsindividualproprietorships/soleproprietorshipspartnershipscorporatesSoleProprietorshipAproprietorisabusinessstructurewithasingleowner.Theexceptionisthatsomestatesallowacategorycalledsoleproprietor(husbandandwife)comprisedofamarriedcouple.Themajorityofnewbusinessesstartedeachyearbeginassoleproprietorships.Someeventuallytakeotherbusinessstructurestoattractcapitalorreduceownerliability.Othersretainthisstructureastheyarepassedon.PartnershipsSomebusinessesrequireadditionalknowledgeorcapitaltobeginorgrow.Apartnershipisabusinessstructurewithtwoormoreindividualsasowners.Eachpartner'scontributiontothebusinessisdefinedandtheyagreeonhowtheresultingprofitswillbesplit.Thespecifictermsareincludedinapartnershipagreement.partnershipsaccountforonlyasmallfractionoftotaleconomicactivity.Thereasonisthatpartnershipsposecertaindisadvantagesthatmakethemimpracticalforlargebusinesses.Themajordisadvantageisunlimitedliability.LimitedLiabilityCompanyAlimitedliabilitycompany(LLC)isahybrid.Insomesituations,ownersaretreatedasindividualsand,inotherconditions,asinvestorsinacorporation.Thestructureisdefinedinanoperatingagreement.TheLLCbusinesscanbemanagedbyanowner-managerorahiredmanager.LLCsareestablishedfortworeasons:liabilityandtaxation.CorporationItenjoystherightoflimitedliability.wherebyeachowner'sinvestmentinthecorporationisstrictlylimitedtoaspecifiedamount.Acorporationisaseparatelegalunit.Itisnottheowners;itis,withinthelaw,itsownentity.Thecorporationcanbeownedbyindividualsorothercorporations,calledstockholders.Thecorporationoperateswithinthelawunderitsownby-laws.Ownershipsharesaretransferable.Ifanownerdies,thesharesaresoldortransferredandthecorporationliveson.Theliabilityofshareholdersislimited,typicallytotheirinvestment.Questions1.whataretheadvantagesanddisadvantagesofparterships?2.canyougivesomeexamplesofeachformofbusinessorganizations?Unit5

MarketDefinitionofMarketAmarketisoneofthemanyvarietiesofsystems,institutions,procedures,socialrelationsandinfrastructureswherebypartiesengageinexchange.CompetitiveMarketAcompetitivemarketisamarketinwhichtherearemanybuyersandmanysellerssothateachhasanegligibleimpactonthemarketprice.TypesofMarketCompetitionPerfectcompetitionPuremonopolyMonopolisticcompetitionOligopolyPerfectCompetitionCharacteristics：ThegoodsbeingofferedforsaleareallthesameThebuyersandsellersaresonumerousthatnosinglebuyerorsellercaninfluencethemarketprice.PureMonopolyPuremonopolyreferstoamarketinwhichasinglefirmisthelonesellerofauniqueproduct.MonopolisticcompetitionMonopolisticcompetitionisanindustrystructureinwhichalargenumberofrivalfirmssellproductsthatareclose,butnotquiteperfect,substitutes.OligopolyFurtheralongthecontinuumbetweenperfectcompetitionandpuremonopolylieoligopoly,typicallyastructureinwhichtheentiremarketissuppliedbyasmallnumberoflargefirms.WhatIsMarketEquilibrium?Marketequilibriumreferstoaconditionwhereamarketpriceisestablishedthroughcompetitionsuchthattheamountofgoodsorservicessoughtbybuyersisequaltotheamountofgoodsorservicesproducedbysellers.WhatIsMarketEquilibrium?PropertiesofequilibriumThebehaviorofagentsisconsistent.NoagenthasanincentivetochangeitsbehaviorEquilibriumistheoutcomeofsomedynamicprocess(stability).StaticEquilibriumandDynamicEquilibriumStaticequilibrium:allquantitieshaveunchangingvaluesDynamicequilibrium:variousquantitiesmayallbegrowingatthesamerate,leavingtheirratiosunchanging.CurrencyMarkethttp:///video_4765873_currency-market_.htmlStockMarketshttp:///video_4757885_what-stock-market.htmlQuestionsWhatismarket?Howmanytypesofcompetitivemarketsarethere?Canyougiveabriefintroductiontoeachtype?Unit6

FactorMarkets:Land,LaborandCapitalLaborMarketLaborisameasureoftheworkdonebyhumanbeings.Labormarketsmaybelocalornational(eveninternational)intheirscopeandaremadeupofsmaller,interactinglabormarketsfordifferentqualifications,skills,andgeographicallocations.DemandandSupplyinLaborMarketThedemandforlaborhasincreasedbecauseoftechnologicalchangeandtheaccumulationofcapital.Thesupplyoflaborhasincreasedbecauseofpopulationgrowthandtechnologicalchangeandcapitalaccumulationinthehome.China’s

LaborMarketAvideopresentationofthedevelopmentofChina'slabormarket/gallery/?video=3000143981CurrentSituationofChina‘sLaborMarketSince2002,theunemploymentratehasfallentomuchmoremanageablelevels.Realwageshaveincreasedcontinuously,whichincreasinglyrewardproductivityMigrationflowsintegratelabormarketsinruralandurbanareas,andacrossregions.CurrentSituationofChina‘sLaborMarketRural-urbanincomegapscontinuetowiden.OwnershipreformhasreducedtheshareofworkersemployedinthestatesectorandmarketreformshavegivenSOEsanincreasinglycommercialorientation.Informalizationoftheurbanlabormarkethasmadelaborallocationincreasinglymarket-orientedbutincreasedthevulnerabilityofworkerswholacksocialinsurancecoverage.ChallengesDevelopeanaccurateandtimelylaborstatisticalinformationsystemtoreportonkeyindicatorssuchasunemployment;Provideaneffectivesafetynetfordislocatedworkers;Developeeffectivesocialinsuranceprogramsthathavebroadcoverage,donotcreateworkdisincentives,andcreateportablebenefits;ChallengesIntegratemigrantsintourbanareasbyequalizingaccesstoeducationandgraduallyextendingcoveragebysocialassistanceandsocialinsuranceprograms;Dismantlethehukousystem.LandMarketLandineconomicsmeansnaturalresources.Itincludesallthosethingswhicharefoundunderandoverthesurfaceofearth.Landfallintotwocategories:nonexhaustiblenaturalresourcesandexhaustiblenaturalresources.CapitalMarketCapitalconsistsofallthoseproductiongoodsthatareusedtoproduceothergoodsorservices.Capitalmarketsarethechannelsthroughwhichfirmsobtainfinancialresourcestobuyphysicalcapitalresources.MarketEfficiencyProductiveefficiencyItoccurswhenagoodorserviceisproducedatthelowestpossiblecost.AllocativeefficiencyItoccurswhenproductionreflectsconsumerpreferences.TheBalancingActofEfficiencyandEquity.au/news/national-times/gittins-the-balancing-act-of-equity-and-efficiency-3589386.htmlQuestionsWhatroledoeslaborplaysineconomicresearch?Whatisthecorrelationbetweensocialprogressandlaborforce?Unit7

Government’sRoleintheEconomyRoleofGovernmentThe

StateConstitutionof1982

specifiedthatthestateistoguidethecountry's

economicdevelopment

bymakingbroaddecisionsoneconomicprioritiesandpolicies,andthatthe

StateCouncil,whichexercisesexecutivecontrol,wastodirectitssubordinatebodiesinpreparingandimplementingthenational

economicplan

andthe

statebudget.SubordinateEconomicBodiesThe

People'sBankofChina,

NationalDevelopmentandReformCommission,

MinistryofFinance;andtheministriesofagriculture;coalindustry;commerce;communication;education;

lightindustry;

metallurgicalindustry;

petroleumindustry;

railways;

textileindustry;and

waterresources

and

electricpower.The

People'sBankofChinaThePeople'sBankofChina(PBCorPBOC)isthecentralbankofthePeople'sRepublicofChinawiththepowertocontrolmonetarypolicyandregulatefinancialinstitutionsinChina.ThePeople'sBankofChinahasthemostfinancialassetsofanysinglepublicfinanceinstitutioninhistory.NationalDevelopmentandReformCommissionTheNationalDevelopmentandReformCommission(NDRC)oftheGovernmentofthePeople'sRepublicofChina,formerlyStatePlanningCommissionandStateDevelopmentPlanningCommission,isamacroeconomicmanagementagencyundertheChineseStateCouncil,whichhasbroadadministrativeandplanningcontrolovertheChineseeconomy.SinceMarch2013theCommissionhasbeenheadedbyXuShaoshi.DirectControlandIndirectControlDirectcontrolDesignatingspecificphysicaloutputquotasandsupplyallocationsforsomegoodsandservices.Indirectcontrol—economicleversAffectingmarketincentives,whichincludelevyingtaxes,settingpricesforproductsandsupplies,allocating

investmentfunds,monitoringandcontrollingfinancialtransactionsbythebankingsystem,andcontrollingtheallocationofkeyresources,suchasskilledlabor,electricpower,transportation,steel,andchemicals(includingfertilizers).BenefitPrinciplevs.Ability-to-payPrincipleThebenefitprincipleIndividualsshouldbetaxedinproportiontothebenefittheyreceivefromgovernmentprograms.Ability-to-payprinciplesTheamountoftaxespeoplepayshouldrelatetotheirincomeorwealth.HorizontalEquityvs.VerticalEquityHorizontalEquityEqualsshouldbetreatedequallyVerticalEquityPeopleinunequalcircumstancesshouldbetreatedunequallyandfairlyProgressiveTaxvs.RegressiveTaxProgressi