The People's 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. www.nytimes.com,11/26/2008
Other things remaining the same,there will be ________ in the exchange rate,________ in imports and ________ in exports.

Question

Quizplus · Accepted Answer

Lowering the lending rate will increase the money supply in China, leading to a decrease in the interest rate and a decrease in demand for the Chinese currency. This will cause a decrease in the exchange rate. A decrease in the exchange rate will make imports more expensive and exports cheaper, leading to a decrease in imports and an increase in exports.

The People's Bank of China Announced That It Was Lowering