Why Is China's Currency Undervalued

question 21

Multiple Choice

Why is China's currency undervalued?

• A) The Asian miracle is over.
• B) They do not trade with the U.S.
• C) They do not allow their currency to appreciate despite large external surpluses.
• D) They are stockpiling international reserves to protect against the next East Asian crisis.
• E) They are not aware of the real value of their currency.

---

Definitions:

Historical Cost Principle

An accounting principle that states that assets should be recorded and reported at their original purchase cost.

Work in Process

Inventory that includes goods that are in the process of being manufactured but are not yet complete.

Finished Goods Inventory

Manufactured goods that are complete and ready for sale.

Lower of Cost

A principle typically applied in the valuation of inventory and financial assets, stating to record the asset at the lower of its historical cost or current market value.