During the Chinese experience with pegging the yuan to the United States (US)dollar, the yuan was ________. As a result, there was a ________ of US dollars on the market and the Chinese government had to purchase US dollars to maintain the peg.
A)overvalued; shortage
B)undervalued; surplus
C)overvalued; surplus
D)undervalued; shortage

Question

Quizplus · Accepted Answer

The yuan was undervalued, which made Chinese exports cheaper and more competitive internationally, leading to a surplus of US dollars in the Chinese market as other countries bought Chinese goods. To maintain the pegged exchange rate, the Chinese government had to purchase these excess US dollars.

During the Chinese Experience with Pegging the Yuan to the United