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.

Question

Quizplus · Accepted Answer

If the yuan has been undervalued at the pegged exchange rate, then the Chinese government would need to increase its reserves of dollars in order to purchase more dollars to maintain the pegged exchange rate. Therefore, option A is the correct answer. Option B and C are incorrect because they suggest that the Chinese government decreased their reserves of dollars or increased their reserves of yuan, which does not align with the scenario. Option D is incorrect because it suggests that the yuan was overvalued, which is not consistent with the pegged exchange rate.

China Began Pegging Its Currency,the Yuan,to the Dollar in 1994