Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, it should reduce the U.S. balance of trade deficit with China.

Question

Quizplus · Accepted Answer

If the Chinese yuan appreciates against the dollar, it makes imports from China more expensive, which could reduce the quantity demanded by U.S. firms, leading to a decrease in imports from China. This could, in turn, reduce the U.S. balance of trade deficit with China.

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