In Order to Level the Playing Field in Trade Between

question 324

Multiple Choice

In order to level the playing field in trade between the U.S. and China, U.S. policymakers have called upon China's government to allow the yuan to float freely, as other world currencies. Through government regulation, China maintains an undervalued currency, which results in

• A) more buying power for Chinese consumers who want to purchase U.S. goods and goods from other countries.
• B) maintaining robust Chinese exports and a favorable balance of trade for China.
• C) developing better relations with industrialized countries who want to increase the value of their exports.
• D) stability and strength of the Chinese yuan against the U.S. dollar and the euro.

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Definitions:

Stimulus Program

A government initiative designed to stimulate economic growth during a recession by increasing public spending or cutting taxes.

Tax Multipliers

Measures the impact of changes in taxes on the overall economic output, indicating how tax changes affect GDP.

Spending Multipliers

Describe the effect of a change in spending (typically by the government) on the total economic output, indicating how initial spending leads to increased levels of income and consumption.

Permanent Income

A theory suggesting that people's consumption choices are more influenced by their expected long-term average income rather than by their current income.