China is the worlds largest exporter and has a fixed nominal exchange to the U.S. dollar. However,

Question:

China is the world’s largest exporter and has a fixed nominal exchange to the U.S. dollar. However, China’s real which determines the country’s competitiveness, can change even when the nominal rate is fixed. Plot since 1993 the nominal of Yuan per dollar (FRED code: EXCHUS). When did China begin to allow its currency to appreciate on a sustained basis? Add to the graph the real (see equation 2 in Chapter 10) by adjusting the Yuan-dollar for relative consumer price changes in China (FRED code: CHNCPIALLMINMEI) and the United States (FRED code: CPIAUCSL). (Hint: Divide the U.S. price index by 1.95 to set a common base year of 2005=100 for both price indexes used in the real formula,) How has China’s real evolved recently? What impact should these changes have on China’s exports?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...