How Were Countries Whose Industries Competed with Chinese Industry Affected

question 131

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.

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Definitions:

Conversion Ratio

The specified number of shares that can be exchanged for one unit of the convertible security.

Exercising Option

The act of implementing the right to buy or sell an underlying asset at a predetermined price before the option expires.

Option Contract

A financial derivative contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a specified time frame.

Underlying Asset

The financial asset upon which a derivative's price is based, such as stocks, bonds, commodities, or currencies.