Abstract

In China, the constantly increasing CPI (Consumer Price Index) has become a prominent signal that indicates an overheated macro economy. An overheated economy and future surplus productivity will lead to a prediction of inflation, which will sustain the inflation in an evil circulation driven by costs and pulled by demand. As a result, it will cause severe financial instability. Therefore, applying a tight monetary policy, adopting a package of control measures, optimizing the structure of economy, and improving the quality of economic growth can help to achieve a fast and healthy development of national economy.

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