China Fixes Its Exchange Rate (Yuan Per Units of Foreign

question 114

Multiple Choice

China fixes its exchange rate (yuan per units of foreign currency) at a rate above its free-market equilibrium level.In order to maintain this exchange rate,and to prevent its currency from ________,the Chinese central bank must be accumulating ________.

• A)appreciating; foreign-exchange reserves
• B)appreciating; reserves of its domestic currency
• C)depreciating; foreign-exchange reserves
• D)depreciating; reserves of its domestic currency
• E)depreciating; U.S.dollars

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Definitions:

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A marketplace in which transactions are regulated by laws and monitored by the government to ensure fairness and compliance.

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