How does China maintain a trade imbalance?

China's Investment in US Bonds Explained

Interactive Video
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Social Studies
•
6th - 10th Grade
•
Hard

Amelia Wright
FREE Resource
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10 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
By printing yuan to buy US dollars, increasing yuan supply and dollar demand
By selling US Treasury bonds
By keeping its currency strong
By increasing the supply of US dollars
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the primary reason China buys US dollars?
To lend it back to the US government
For direct investment in US companies
To keep its currency artificially weak
To invest in real estate
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What does China do with the US dollars it buys?
Converts them back to yuan
Stores them in a warehouse
Buys US Treasury bonds, T-bills, and T-notes
Invests in the stock market
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the effect of China buying US Treasury bonds?
Decreases the demand for T-bonds
Increases the interest rates on US debt
Creates incremental demand for T-bonds, raising their price
Reduces China's foreign reserves
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why does China prefer to buy US Treasury bonds with its US dollars?
To control the US economy
To influence US politics
To avoid taxes
To collect interest on its money
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How does the increased price of T-bonds affect US government borrowing costs?
Decreases the interest rates, lowering borrowing costs
Forces the US to default on loans
Has no effect on borrowing costs
Increases the cost of borrowing
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the duration of T-bills?
Exactly one year
More than ten years
More than five years
Less than one year
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