How Were Countries Whose Industries Competed with Chinese Industry Affected

question 19

Multiple Choice

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

• A)Because the yuan was undervalued at the pegged exchange rate, the level of Chinese exports remained higher than they would have been if the exchange rate was allowed to float freely.
• B)Because the yuan was overvalued at the pegged exchange rate, competing firms from other countries feared that abandoning the peg would lead to an increase in Chinese exports.
• C)Competitors feared that the declining value of the dollar would continue to make Chinese goods more expensive.
• D)Because China's population is so large relative to other countries, the pegged exchange rate made the goods of foreign competing firms much less expensive than domestic Chinese goods.
• E)Because the yuan was overvalued, Chinese consumers were consuming more luxury goods than can be maintained at its current level of development.

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