The Peopleʹs Bank of China announced that it was lowering by 1.08 percentage points the one -year lending rate in response to the slowdown in the Chinese economy. This rate is the Chinese equivalent of the federal funds rate in the United States.
Other things remaining the same, there will be __________in the exchange rate, __________in imports and__________ in exports.

Question

Quizplus · Accepted Answer

Lowering the one-year lending rate would lead to a decrease in the exchange rate of the Chinese currency since lower interest rates make it less attractive to foreign investors. This would result in a decrease in imports as foreign goods become relatively more expensive, and an increase in exports as Chinese goods become relatively cheaper for foreign buyers.

The Peopleʹs Bank of China Announced That It Was Lowering