Figure 15.5 Alt text for Figure 15.5: In figure 15.5, a graph illustrates the quantity of yuan traded against the exchange rate.
Long description for Figure 15.5: The x-axis is labelled, quantity of yuan traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the yuan.Supply curve S, is a straight line which slopes up from the bottom left corner to the top right corner.Demand curve D, is a straight line which slopes down from the top left corner to the bottom right corner.The curves intersect at point A, (600, 0.13).Point A, and unmarked points (800, 0.11), (500, $0.14), (700, $0.14), and (400, 0.11)are all connected to their corresponding values on the x and y-axes with dotted lines.
-Refer to Figure 15.5.The Chinese government pegs the yuan to the U.S.dollar, at one of the specified exchange rates on the graph, such that it undervalues its currency.Using the figure above, this would generate

Question

Figure 15.5  Alt text for Figure 15.5: In figure 15.5, a graph illustrates the quantity of yuan traded against the exchange rate.
Long description for Figure 15.5: The x-axis is labelled, quantity of yuan traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the yuan.Supply curve S, is a straight line which slopes up from the bottom left corner to the top right corner.Demand curve D, is a straight line which slopes down from the top left corner to the bottom right corner.The curves intersect at point A, (600, 0.13).Point A, and unmarked points (800, 0.11), (500, $0.14), (700, $0.14), and (400, 0.11)are all connected to their corresponding values on the x and y-axes with dotted lines.
-Refer to Figure 15.5.The Chinese government pegs the yuan to the U.S.dollar, at one of the specified exchange rates on the graph, such that it undervalues its currency.Using the figure above, this would generate

Quizplus · Accepted Answer

When a government pegs its currency at a rate that undervalues it, demand for the currency exceeds its supply, creating a shortage. The specific quantity of the shortage would depend on the details in the figure, which isn't provided here, but the concept remains that undervaluing a currency leads to a shortage.

Figure 155 Alt Text for Figure 15