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4 * . Suppose the free floating exchange rate between the U . S . dollar and Yuan $ 1 = 4 Yuan, i .

4*. Suppose the free floating exchange rate between the U.S. dollar and Yuan $1=4 Yuan, i.e.,S(Yuan4$). Assume that China wants to maintain a weaker Yuan at the rate of $1=8 Yuan, i.e.,S(Yuan8$).
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 action(s) by China's central bank, and briefly, explain the macroeconomic impacts in China.
b) Assume after China supported its price floor, with action(s) you describe in (a) above, political uncertainty in the rest of the world causes capital inflow into the U.S.($ country) economy. Show with graph and explain consequences of this capital inflow into the U.S. market on the China's central bank policy for maintaining its rate at S(Yuan8$).
Please include graphs.
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