One Consequence of China Operating a Crawling Peg Is That

question 27

Multiple Choice

One consequence of China operating a crawling peg is that China

• A)is accumulating U.S. dollar reserves.
• B)will eventually run out of foreign reserves, and the yuan will depreciate.
• C)will eventually run out of foreign reserves, and the yuan will appreciate.
• D)will become more competitive in the long run.
• E)is slowing its economic growth.

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Definitions:

Linear Relationship

A relationship between two variables where the change in one variable is directly proportional to the change in another variable.

Reduction

A process or action that decreases the amount or size of something.

Expected Return

This is the average amount of profit or loss an investor can expect on an investment, calculated based on historical data or subjective probabilities.

Risky Securities

Financial instruments that carry a higher risk of losing the principle due to volatile market conditions but potentially offer higher returns.