Suppose that the U.S. dollar-Chinese yuan exchange rate is fixed by the U.S. and Chinese governments. Assume also that labor is immobile between the United States and China due to high transportation costs. Which of the following situations is likely to occur if there is a simultaneous increase in the demand for U.S. goods and a decrease in the demand for Chinese goods? a) The Chinese unemployment rate will increase, and the country will undergo hard economic times for a sustained period. b) The U.S. unemployment rate will increase, and the country will undergo hard economic times for a sustained period. c) The Chinese unemployment rate will initially rise but then drop as the Chinese yuan depreciates against the U.S. dollar. d) The Chinese unemployment rate will initially rise but soon drop as unemployed Chinese move to the United States for employment
Suppose that the U.S. dollar-Chinese yuan exchange rate is fixed by the U.S. and Chinese governments. Assume also that labor is immobile between the United States and China due to high transportation costs. Which of the following situations is likely to occur if there is a simultaneous increase in the demand for U.S. goods and a decrease in the demand for Chinese goods? a) The Chinese unemployment rate will increase, and the country will undergo hard economic times for a sustained period. b) The U.S. unemployment rate will increase, and the country will undergo hard economic times for a sustained period. c) The Chinese unemployment rate will initially rise but then drop as the Chinese yuan depreciates against the U.S. dollar. d) The Chinese unemployment rate will initially rise but soon drop as unemployed Chinese move to the United States for employment
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that the U.S. dollar-Chinese yuan exchange rate is fixed by the U.S. and Chinese governments. Assume also that labor is immobile between the United States and China due to high transportation costs.
Which of the following situations is likely to occur if there is a simultaneous increase in the demand for U.S. goods and a decrease in the demand for Chinese goods?
a) The Chinese unemployment rate will increase, and the country will undergo hard economic times for a sustained period.
b) The U.S. unemployment rate will increase, and the country will undergo hard economic times for a sustained period.
c) The Chinese unemployment rate will initially rise but then drop as the Chinese yuan depreciates against the U.S. dollar.
d) The Chinese unemployment rate will initially rise but soon drop as unemployed Chinese move to the United States for employment.
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