Draw a graph to illustrate and explain how China might experience an inflation spiral.
China’s inflation accelerated in May to 5.4 percent, adding to the case for the central bank to tighten monetary policy. Inflation has been fueled by a rise in food prices, made worse by severe drought in farming areas. Some economists say inflation is also the result of China’s massive stimulus during the global financial crisis. Like elsewhere, China is coping with a rise in global commodity prices, which are adding to inflationary concerns for policymakers. China’s economy expanded in 2010 by 10.3 percent, a pace that slowed in the first quarter to 9.7 percent.