Answer

Part A: Microeconomics

1

1. Diagram has been attached

When incomes rise the demand for TVs increased by 500 more TVs per month at every price. See the attached table for the shift in demand. The demand curve shifted to the right and the equilibrium price increased to $160 while equilibrium quantity increased to 1,900.

2) 

The normal demand curve is D₀ while the normal supply curve is S₀ in the attached diagram.

1. When more banana suppliers enter the market the supply curve moves to the right and is represented by S₁ as shown in the attached diagram. Demand reduces as supply increases and equilibrium price drops whereas the equilibrium quantity increases. This is because when more banana farmers entered the market, supply increased while demand remained constant (Rothbard, 2012).
2. When people’s incomes went up the demand curve shifted to the right to D₂ as shown in the diagram. The equilibrium price increased as well as the equilibrium quantity. This happens because when incomes went up demand increased while supply remained constant (Álvarez, Guevara, Juan & López, 2009).

Part B: Macroeconomics  

In 2006 China was experiencing an expansion in its business cycle. China was going through expansion business cycle because of various factors. Firstly, China Business Confidence was on an upward trend in 2006. In January 2006 China’s Business Confidence level rose sharply and thereafter kept on rising throughout most of the months in 2006. China’s exports grew steadily in 2006 and in fact 2006 witnessed one of the fastest growth rates ever recorded. The next reason is that the inflation rate was the lowest in 2006 than at any other time before then. Low inflation rate is one of the signs of an expanding business cycle.  Unemployment dropped sharply in July 2006 to October 2006 attaining the lowest unemployment rate in the year 2006.  The last factor that demonstrated that China was going through expansion was also due to the fact that the gross domestic growth rate grew by double digits year on year in 2006.  The graphs below demonstrate the fact that the Chinese economy in 2006 was going through expansion

The components of Chinese Aggregate Demand in quantity include total expenditure in consumption in a given year, total investment recorded in the economy, total amount of expenditure incurred by the government and total amounts of exports made less total amount of imports in a China in 2005 and 2006. During year 2005 and 2006 consumption expenditure increased as so did the amount of investments in the economy. Total amount of expenditure by the government increased in 2006 as compared to 2005. Exports grew at a higher rate than imports and resulting in a surplus. China hence had a surplus in balance of trade. 

These factors increased aggregate demand in China in 2006 as compared to 2005. The formula for obtaining aggregate demand in quantity is given by adding up total expenditure in consumption in a given year, total investment recorded in the economy, total amount of expenditure incurred by the government and total amounts of exports made less total amount of imports in a country in a year.  Using the formula describe above the aggregate demand is shown in the table below.

According to the table above aggregate demand increased from 733,389 in 2005 to 799,834 in 2006 representing a growth of 9.06%. The growth in the components of aggregate demand affected aggregate demand in 2006 as shown in the table above (Chinese Indicators, 2005; Chinese Indicators, 2006).

2017. The Chinese economy is still on expansion business cycle in 2017. In 2017, the shown in the table below support this view

 (Chinese indicators, 2016; Chinese Indicators, 2017)

            China’s inflation rate increased marginally from 1.40% to 1.80% showing a general increase in amount of money in supply and increase in demand. Unemployment rate dropped from 3.97% in 2016 to 3.95% in 2017 which shows that more jobs were created by the economy. GDP annual growth rate went up from 1.30% in 2016 to 1.70% in 2017. This shows that the value of goods produced by the economy at market prices also went.  The country also exported more goods than it imported which is demonstrated by the positive balance of trade in 2017.Governemnt debts to GDP remained unchanged which shows that the company managed to keep its expenditure in check (Chinese indicators 2017).