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4 * . Suppose the free floating exchange rate between the U . S . dollar and Yuan $ 1 = 4 Yuan, i .
Suppose the free floating exchange rate between the US dollar and Yuan $ Yuan, ie Assume that China wants to maintain a weaker Yuan at the rate of $ Yuan, ie
a What actions by the central bank of China is required to make this weaker rate to be binding to be an effective price floor Draw a completely labeled graph, and explain possible actions by China's central bank, and briefly, explain the macroeconomic impacts in China.
b Assume after China supported its price floor, with actions you describe in a above, political uncertainty in the rest of the world causes capital inflow into the US$ country economy. Show with graph and explain consequences of this capital inflow into the US market on the China's central bank policy for maintaining its rate at
Please include graphs.
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