By holding so much in foreign currency reserves,China is risking

Question

Quizplus · Accepted Answer

Holding a large amount of foreign currency reserves can lead to inflation because it increases the money supply in the domestic economy. This is because when a country buys foreign currency, it pays for it with its own currency, which increases the supply of domestic currency in circulation. This can lead to inflationary pressures, as more money in circulation can lead to higher prices for goods and services.

By Holding So Much in Foreign Currency Reserves,China Is Risking