If China Wished to Reduce Their Accumulation of Foreign Exchange

question 19

Multiple Choice

If China wished to reduce their accumulation of foreign exchange reserves they could:

• A) allow their currency, the yuan, to float freely in the market place.
• B) reduce their current account surplus by importing more goods than they export.
• C) undertake both of the activities identified in choices A and B.
• D) dig a big hole and bury the reserves.

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Definitions:

Independent Plans

are strategies or courses of action devised and executed autonomously by an individual, organization, or country without external control or influence.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price over a certain period.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a given time period.

Surplus

The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific price.