China Fixes Its Exchange Rate (Yuan Per Units of Foreign

question 36

Multiple Choice

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

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

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