The Chinese Government Fixes Its Exchange Rate Above Its Free-Market

question 15

Multiple Choice

The Chinese government fixes its exchange rate above its free-market equilibrium level.Its purpose in keeping the Chinese currency depreciated is probably to

• A)make it more affordable for Chinese firms to import new materials.
• B)make it more affordable for Chinese households to purchase consumer goods from the United States.
• C)maintain respect for the Chinese yuan.
• D)help maintain a current account deficit and thus a capital inflow to China.
• E)make Chinese exports more attractive to the rest of the world.

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Definitions:

Lateral Thinking

A problem-solving approach that involves looking at the situation from different perspectives and using creative thinking to find unexpected solutions.

Vertical Thinking

A methodical process of problem-solving that focuses on depth and detail, often following a specific set of logical steps.

Problem Solving

A process of identifying a problem, generating possible solutions, and implementing a solution to address the issue effectively.

Implementing Plan

The process of putting a designed strategy or plan into action to achieve specific goals.