In the Spring of 2005, People in Business and Government

question 22

Multiple Choice

In the spring of 2005, people in business and government were calling for China to move away from its fixed-exchange rate regime because by pegging its currency China was:

• A)Hindering its own growth
• B)Importing U.S.monetary policy
• C)Adding to its current account deficit
• D)Exporting its inflation to the United States

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Definitions:

Compounded Monthly

A method of calculating interest where the earned interest is added to the principal at the end of each month, allowing the interest in the next month to be calculated on the new total.

Present Value

Today's value of a sum of money or sequence of cash flows set to be received in the future, calculated using a given rate of interest.

Compounded Monthly

This refers to the process where interest is added to the principal balance of a loan or deposit monthly, allowing the interest to then earn interest in subsequent periods.

Compounded Quarterly

The method of calculating interest where the interest is added to the principal amount four times a year.