Question

China began pegging its currency, the yuan, to the dollar in 1994. Because the yuan has been ________ at the pegged exchange rate, the Chinese government ________ its reserves of dollars as the government purchased more ________ to maintain the pegged exchange rate.

Answer 1

China began pegging its currency, the yuan, to the dollar in 1994.

• Yuan was undervalued
• Chinese government increased it's reserves
• Government purchased more dollars

What is currency pegging?

Thisn is the fixing of a nations currency at a fixed exchange rate with that of another country.

The monetary system of China decided to fix their nations exchange rate on the dollar in the year 1994.

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