21. In the early 2000s, China was running a large current account surplus. (LO35-4)

a. What did this suggest about its financial and capital account?

b. China’s private balance of payments was in surplus.

What does this suggest about its exchange rate regime?

c. What actions was the Chinese central bank likely undertaking in the foreign exchange markets? Demonstrate the situation with supply and demand graphs.

d. If the Chinese central bank pulled out of the foreign exchange market, what would likely happen to the yuan?