If the Chinese government wants to keep the real and nominal exchange rates between the yuan and the U.S. dollar fixed at 8 yuan per dollar, the: inflation rate in China must be constantly lower than the inflation rate in the United States. inflation rate in China must be constantly higher than the inflation rate in the United States. interest rate in China must be higher than the interest rate in the United States. inflation rate in China must be equal to the inflation rate in the United States.

Exchange rate:It is the rate at which the currency of one country is being exchanged with the…

Answered: If the Chinese government wants to keep…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter11: Foreign Exchange, Trade, And Bubbles

Section: Chapter Questions

Problem 4MC

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If the Chinese government wants to keep the real and nominal exchange rates between the yuan and the U.S. dollar fixed at 8 yuan per dollar, the:
	inflation rate in China must be constantly lower than the inflation rate in the United States.
	inflation rate in China must be constantly higher than the inflation rate in the United States.
	interest rate in China must be higher than the interest rate in the United States.
	inflation rate in China must be equal to the inflation rate in the United States.

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