Suppose that the government of China is currently fixing the exchange rate between the U.S. dollar and the Chinese yuan at a rate of $1 = 6 yuan. Also suppose that at this exchange rate, the people who want to convert dollars to yuan are asking to convert $10 billion per day of dollars into yuan, while the people who are wanting to convert yuan into dollars are asking to convert 36 billion yuan into dollars. What will happen to the size of China's official reserves of dollars?
Currency Exchange Dynamics and Impacts

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Professional Development
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University
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Hard
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17 questions
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1.
MULTIPLE CHOICE QUESTION
1 min • 1 pt
They Will stay the same
They will decrease
They will increase
2.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Generally speaking, the dollar price of euros is determined
in a currency exchange market that equates the supply of euros with the demand for dollars.
by the European Union (EU).
in a currency exchange market that equates the supply of euros with the demand for euro
by the World Trade Organization (WTO).
Answer explanation
The dollar price of the euro is determined in a currency exchange market that equates the supply of euros with the demand for euros.
3.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
The dollar price of euros might increase if
there was an increase in European purchases of large U.S. aircraft.
the demand for euros increased or the supply of euros decreased.
the demand for euros decreased or the supply of euros increased.
there was a decrease in U.S. purchases of large European aircraft.
Answer explanation
A factor that might increase the dollar price of the euro could be the result of an increase in the demand for the euro or a decrease in the supply of the euro. Examples: Increase in demand: More Airbus aircraft are purchased by U.S. airlines. Decrease in supply: Less Boeing aircraft are purchased by European airlines
4.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
The dollar price of euros might decrease if
there was an increase in U.S. purchases of large European aircraft
the demand for euros increased or the supply of euros decreased
there was a decrease in European purchases of large U.S. aircraft
the demand for euros decreased or the supply of euros increased
5.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Consider the following statement: "A rise in the dollar price of euros necessarily means a fall in the euro price of dollars." This statement is
false, because if it takes more dollars to purchase one euro, then it takes more euros to buy a dollar.
true, because if it takes more dollars to purchase one euro, then it takes more euros to buy a dollar
false, because if it takes more dollars to purchase one euro, then it takes fewer euros to buy a dollar
true, because if it takes more dollars to purchase one euro, then it takes fewer euros to buy a dollar
6.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Consider the following: The dollar price of a Big Mac in the United States is $3.50. The euro price of this same good in Germany is 1.75 euros. Purchasing power parity suggests that
$1 = 1 euro
$0.5 = 1 euro
$1 = 0.5 euros
$1 = 2 euros
7.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Suppose that the government of China is currently fixing the exchange rate between the U.S. dollar and the Chinese yuan at a rate of $1 = 6 yuan. Also suppose that at this exchange rate, the people who want to convert dollars to yuan are asking to convert $10 billion per day of dollars into yuan, while the people who want to convert yuan into dollars are asking to convert 36 billion yuan per day into dollars. What will happen to the size of China's official reserves of dollars?
They will stay the same.
They will decrease.
They will increase. Correct
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