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Article Summary In an Effort to Decrease an Outflow of Capital Which

question 38

Multiple Choice

Article Summary
In an effort to decrease an outflow of capital which has threatened to extend the country's economic slowdown,China's central bank sold $94 billion U.S.dollars in an attempt to support its currency,the yuan.The move followed the largest devaluation of the yuan in more than 20 years.According to analyst Li Miaoxian,"If the central bank continues its intervention,China's foreign-exchange reserves will continue to shrink -- the heavier the intervention,the deeper the fall.It's "inevitable" the nation will see continuous capital outflows and yuan depreciation pressure in the coming months.Over the past decade,the Chinese central bank had purchased dollars in an effort to stem the appreciation of the yuan during a period of a growing trade surplus.Now facing an increasing sell-off of the yuan,Bloomberg economists note that "The fear is that today's data will reinforce the market view that the only way for the yuan to go is down,and further accelerate capital outflows."
-Refer to the Article Summary.All else equal,a depreciation of the Chinese yuan relative to a currency such as the U.S.dollar should ________ the current account balance in China and therefore ________ the financial account balance in China.

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