The Following Figure Depicts the Demand for Chinese Yuan in the Foreign

question 74

Multiple Choice

The following figure depicts the demand for Chinese yuan in the foreign currency exchange market. Use this figure to answer the questions that follow.

-If the interest rates in China fall relative to interest rates in the United States and,at the same time,U.S.consumer demand for Chinese goods decreases,the demand curve in the figure above:

• A) will not shift because interests rates are not related to exchange rates.
• B) will not shift because interests rates only affect the supply curve.
• C) can either increase from D₁ to D₂ or decrease from D₁ to D₃.
• D) will increase from D₁ to D₂.
• E) will decrease from D₁ to D₃.

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