The Chinese central bank might intervene in foreign exchange markets:
A) to bring an appreciation of the Yuan so that imports are less expensive to the Chinese.
B) to bring a depreciation of the Yuan to make imports more expensive to the Chinese.
C) to bring a depreciation of the Yuan to make Chinese exports cheaper for foreigners.
D) all of the above.

Question

Quizplus · Accepted Answer

The Chinese central bank might intervene in foreign exchange markets for all the listed reasons: to adjust the value of the Yuan in order to influence the cost of imports and exports, thereby affecting the country's trade balance and economic health. Appreciating the Yuan makes imports cheaper and exports more expensive, while depreciating the Yuan does the opposite.

The Chinese Central Bank Might Intervene in Foreign Exchange Markets