Which of the following has been a consequence of China pegging its currency against the US dollar throughout the 2000s?

(Consider This) Which of the following has been a consequence of China pegging its currency against the U.S. dollar throughout the 2000s? China has experienced a loss of dollar reserves. China has experienced a large trade deficit in goods with the United States.

What are some of the disadvantages of China’s pegging of the yuan to the dollar?

What are some of the disadvantages of China’s pegging of the yuan to the dollar? The Chinese own a very large amount of U.S. assets, including low – yielding U.S. Treasury securities. Which of the following is NOT and advantage of exchange-rate targeting as a monetary policy strategy?

What does it mean when a currency is pegged?

A currency peg is a policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or a basket of currencies. Pegging a currency stabilizes the exchange rate between countries. Doing so provides long-term predictability of exchange rates for business planning.

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What are the implications of China’s exchange rate policy on doing business with China?

Due to the fixed exchange rate, many countries preferred to do business with China as they were able to get more value from their business due to the undervalued currency. They would be able to get more products and services produced in China using less capital due to high productivity.

How does China peg its currency?

China does not have a floating exchange rate that is determined by market forces, as is the case with most advanced economies. Instead it pegs its currency, the yuan (or renminbi), to the U.S. dollar. The yuan was pegged to the greenback at 8.28 to the dollar for more than a decade starting in 1994.

What are the advantages and disadvantages of dollarization over other forms of exchange rate targeting?

For dollarizing countries, advantages include lower administrative costs, a firm basis for a sounder financial sector, and lower interest rates. Disadvantages include the loss of monetary autonomy, seigniorage, and a vital national symbol as well as greater vulnerability to foreign influence.

How does China devalue the yuan?

China’s currency has weakened to its lowest point in more than a decade, prompting the US to label Beijing a currency manipulator. … On Monday, the People’s Bank of China (PBOC) said the slump in the yuan was driven by “unilateralism and trade protectionism measures and the imposition of tariff increases on China”.

Is yuan pegged to dollar?

Until 2005, the value of the renminbi was pegged to the US dollar. As China pursued its transition from central planning to a market economy and increased its participation in foreign trade, the renminbi was devalued to increase the competitiveness of Chinese industry.

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Which is an example of a successful peg?

Hong Kong is one of the most successful examples of a currency board. The Hong Kong Monetary Authority (HKMA) has maintained a fixed exchange rate of HKD7. 8 to one U.S. dollar. A not-so-successful example of a currency board arose in Argentina.

Which best explains what happens when a currency is pegged to the US dollar?

Which best explains what happens when a currency is pegged to the U.S. dollar? The value of the pegged currency goes up and down depending on the exchange rate of the U.S. dollar.

How does the Chinese government limit the use of the Chinese currency to RMB on the global currency markets?

Chinese government limit the use of RMB on the global currency markets through closely controlling the trading in the RMB such as setting rules and regulations to being followed. … Moreover, the currency used to settle the trade transactions for instance Chinese exporters, is normally paid in U.S. dollars.

Why does China weaken its currency?

China’s main justification for devaluing the yuan in 2015 was the rise of the U.S. dollar. Other reasons included the country’s desire to shift toward domestic consumption and a service-based economy.

How Chinese monetary policy might impact some other part of the world economy?

Given the capital controls in place in the Chinese economy, the effects of Chinese monetary policy shocks are likely to be transmitted through the trade channel, where a domestic monetary expansion increases the demand for imports, and leads to an increase in aggregate output and prices in a foreign economy.

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