Suppose market forces outside of the control of the Chinese government are causing the price of Chinese yuan in terms of Japanese yen to rise.In order to maintain the current value of the yuan,the Chinese government must:

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To maintain the current value of the yuan, the Chinese government must buy yen with newly created yuan. This will increase the supply of yuan in the market, decreasing its value, and increasing the supply of yen, which will raise its value. Thus, the exchange rate between yuan and yen can be kept stable. Other options such as filing a pegging application with international currency-management agencies or banning Chinese firms from hiring Japanese workers are not relevant to maintaining the exchange rate between two currencies. Additionally, using tax incentives to encourage Chinese firms to hire more Japanese workers is not related to currency exchange rates. The World Trade Organization only deals with trade regulations, not currency exchange rates.

Suppose Market Forces Outside of the Control of the Chinese