A Study On The Dynamic Relationship Between The Price Level And The Urban Residents’ Consumption Expenditure

The economic growth of China, really sporting a good momentum, has averaged more than9%a year since it implemented reform and opening up policy thirty years ago. However, from the point of view of the structure of economic growth, the contribution of investment and exports to the economic growth of China is diminishing. And we must shift from investment and exports towards consumption to support new round of economy grows. But the evidence of practical economy operation shows that the improving function of consumption to economy has not fully displayed. After extensively analyzing the main factors retarding the growth of household consumption in our country, academia is fully aware that the fluctuation of price level is an important index variable of consumption that can not be ignored. The price level is a barometer of macroeconomic performance, we must analyze and forecast the trends of the fluctuation of price level accurately to master the operation and trends of the overall economic. The inflation of prices is an indisputable fact in recent years. And the rapid rise on price of beans, garlic, ginger and sugar indicates that it has a big impact on our daily consumption. The fluctuation of price level impacts on the residents’expenditure by changing people’s purchasing power, consumption psychology and inter-temporal consumption. Based on the data of the urban residents’ expenditure and consumer price index, this paper validates the dynamic relationship between the price level and the urban residents’expenditure from the total and structural analyses by the methods of constructing the model of the price level and expenditure, correlation analysis and least squares. And we finally arrived at the conclusions as follows:1. The urban residents’total expenditure is highly related to the price level, while different kinds of consumption expenditure have an inconsistent response to their own price levels. For example, transport and communication expenditure and education spending are highly related to their own price levels;2. People will increase consumer spending as the price increases in the short term. But a persistent rise in prices will inhibit the urban residents’ expenditure. And this negative effects increased over time;3. The increased in consumer spending caused by the rising prices among different income groups appears U type change. And the inhibition of a persistent rise in prices effects on low-income groups’consumption is even more pronounced;4. Time lag effect between different kinds of consumption expenditure and the price level is not significant. The both relative relationship is still positive, that is, people’s consumptions have high inertia. Based on the previous article analyzes and conclusions, this paper puts forward some policy suggestions to keep overall price levels stable, expand domestic demand, protect low-income groups and guid rational consumption in the end.