In August 2015 investor sentiment shifted against the Chinese yuan. Investors soldthe yuan and bought dollars, as financial capital flowed out of China, seeking betterrates of return in other countries. What actions did China take in response to thissituation?O China used $1 trillion of its foreign exchange reserves to purchase the yuan in an attempt toprevent further devaluation and tightened capital controls on financial outflows.O China loosened capital controls to encourage forcign investment into the Chinese economy.O China sold the yuan to encourage further depreciation in an attempt to improve its tradedeficit.China's monetary authority sold tie yuan in an attempt to orevent fürther devaluation andraised interest rates to stem the outflow of forcige capital.

Capital flows refer to the change of money with the motive of investment, trade, or other economic…

In August 2015 investor sentiment shifted against the Chinese yuan. Investors sold the yuan and bought dollars, as financial capital flowed out of China, seeking better rates of return in other countries. What actions did China take in response to this situation?

In August 2015 investor sentiment shifted against the Chinese yuan. Investors sold the yuan and bought dollars, as financial capital flowed out of China, seeking better rates of return in other countries. What actions did China take in response to this situation?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 6PA

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Concept explainers

Normal and Inferior Goods

Understanding a normal good and an inferior good is important because it tells us what will happen to demand different products during booms and recessions.

Question

In August 2015 investor sentiment shifted against the Chinese yuan. Investors sold
the yuan and bought dollars, as financial capital flowed out of China, seeking better
rates of return in other countries. What actions did China take in response to this
situation?
O China used $1 trillion of its foreign exchange reserves to purchase the yuan in an attempt to
prevent further devaluation and tightened capital controls on financial outflows.
O China loosened capital controls to encourage forcign investment into the Chinese economy.
O China sold the yuan to encourage further depreciation in an attempt to improve its trade
deficit.
China's monetary authority sold tie yuan in an attempt to orevent fürther devaluation and
raised interest rates to stem the outflow of forcige capital.

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