Inflation and Extensive Way of Economic Growth

correspondingly. This would go round and begin and again. In the metal currency system, the metal currency itself has stable value. When the extensive expanded reproduction of society is over, the balance is formed and the price and value tend to be identity, the metal currency can adjust the money stock in the field and the surplus currency would precipitate. So there is no inflation in the metal currency system. The state is not as the same as that of in the paper currency system. When the aggregate social products and its internal structure tend to be in a state of balance, the prices would fall .But it is higher than that of before expanded reproduction. This is because that not all of the supplementary paper currency recedes from the field of circulation, but some remain in it. So it is evident that the extensive expanded reproduction of society causes the price to go up and causes paper currency devaluation. When the next extensive expanded reproduction of society starts, the overall price level would go up again along with paper currency devaluation. And the inflation is formed.

In the process of reproduction, the labor’s value is compensated by form wages payment. Inflation makes labor’s wages decline. In our economic life, in order to maintain the reproduction can be operated smoothly, the governments often increase the labor’s nominal wages to prevent the actual wages from decline. In the other hand, the general wages increase pushes the commodity price and service cost to a new higher point in an all-round way. In this way, the price and salary take turns going up.

To sum up, the concept of the inflation can be summarized as,

In the situation of paper currency system circulation, the extensive expanded reproduction of society (extensive way of economic growth) makes paper currency depreciated and leads to a universal, undulatory and sustained prices rising, this kind of economic phenomenon is called INFLATION.

Ⅱ International business affects domestic economic system inflation

1         The category and quantity of imports or exports that affect the domestic commodity total amount and structure can increase or decrease the contradiction of total amount and structure requirement.

2         The price of import and export affects the price of domestic commodity, The degree of this two kind of factors affecting domestic inflation is decided by the degree of domestic economy depending on outside, The more it depends on outside, the more it is affected by international environment, on the contrary, the less it  depends on outside, the less it is affected by international environment

NOTE

1   

The value law is universal in the market economic system

That the variation of price is normal phenomenon in the market is expressed by value law. In mixed economy, the most merchants’ price obeys value law. For the reason of natural or social, some merchant’s price is higher than its value even if there is balance between its supply and demand; some merchant’s price can not be far off its value even if  its demand exceeds supply strongly. That is the effect being controlled by country with limited price or sbsidy.Though not all time these merchants’ price is based on its value, the price also will rise when its supply less demand, otherwise will down. 

2.  Economic development is a unity of both equilibrium and disequilibrium

Any system is in a relatively balance situation and it ill towards new balance through making an exchange with others or adjusting itself, even if it far deviates from balance by being lashed. Equilibrium is relative and disequilibrium is absolute. So it is with the economic system.

Section Two

The Corelationship between Extensive Expanded Reproduction of Society (EERS) and Inflation

 Social production is always developing. Social production is the unity of simple reproduction and expanded reproduction. Therefore we can regard one year as one productive circle.

Let’s assume that the Gross National Product(GNP) is Cn+Vn+Mn in n year A.D.，National Income（NI） is Vn+Mn，and the invariable capital consumed is Cn(GNP—NI)，total capital is Cn+Vn.In the next year , GNP is Cn+1+V n+1+M n+1 ，National Income（NI） is V n+1+M n+1，and the invariable capital consumed is C n+1, total capital is C n+1+V n+1.The extensive expanded reproduction of society is that surplus value is turned into capital, some is turned into V, some is turned into C.. That is,

Cn:Vn=△C: △V

    Then   Cn+1:V n+1= Cn:Vn

Then   (Cn+1+V n+1) :( Cn+Vn) = Cn+1: Cn

Therefore, (Cn+1+V n+1) :( Cn+Vn),which the productive scale about n+1 year A.D. compares with that of n year’s can be regarded as Cn+1 :Cn.That the extensive expanded  productive scale about n+1 year A.D. compares with that of n year’s can be regarded as( Cn+1 :Cn)﹡100%—1.

 Now let us determine the correlationship coefficients between EERS and inflation with the method of least-squares and statistical data of 31 countries. The results calculated is as follows,

     INSERT TABLE 4 HERE

 We can also have  ,   (Cn+1+V n+1) :( Cn+Vn)= Vn+1 :Vn

   V indicates monetary wage

  This is the reason that Phillips Curve remains. That is, when the extensive way of economic growth is the main part in the system, there is positive correlationship between inflation and monetary wage.

 Data of GNP NI GDP Deflators (SNA) is looked up from international financial statistics yearbook. 1991. Data of GSP NI PRI (MPS) is looked up from Chinese Statistics yearbook 1993.

References

1、Xing Fuzhi  
Inflation Reasons Analyzing

  CAI JING JIAN DU LUN TAN

  2003.3 

2     Cai Zhongzhi (1993):
The Research of How Does Inflation Happen In China

 the people’s university of china press Beijing city p4

3      Dong Jiancai(1991)
the Survey of Inflationary Question

the Chinese Broadcast And TV  College Press Beijing City

4     Li laya (1994) : 
inflation  and its anticipation

   the People’s University Of China Press Beijing City

5     Li laya (1995) : 
Inflation  And Uncertainty

   the People’s University Of China Press Beijing City

6   

The committee of statistical principle of national economy(1988):
the Statistical Principle Of National Economy

7   

Wei Xinghua ,Gu Xueyong(1990):
The Political Economics Principle