Asked by Sergei Glukhov on Jun 01, 2024
Verified
A financial market panic that causes US depositors to withdraw their funds from Chinese banks,would cause a(n) ________ in the demand of US dollars and a(n) _________in the demand of the Chinese Yuan.
A) Increase;Increase
B) Increase;Decrease
C) Decrease;Increase
D) Decrease;Decrease
Chinese Yuan
The official currency of the People's Republic of China, also known as Renminbi.
US Dollars
The official currency of the United States, widely used as a standard and reserve currency worldwide.
Financial Market Panic
refers to a sudden and widespread fear among investors, leading to rapid selling of securities and a sharp decline in market prices.
- Understand the factors influencing currency demand and exchange rates.
- Analyze the impact of financial market panics on currency values.
Verified Answer
MK
Matthew KacergisJun 03, 2024
Final Answer :
B
Explanation :
If a financial market panic causes US depositors to withdraw their funds from Chinese banks, it would lead to an increase in demand for US dollars as the depositors will convert the Chinese Yuan into US dollars before withdrawing their funds, and a decrease in demand for Chinese Yuan as the depositors will be less willing to hold Yuan due to the panic, and will likely convert them into other currencies or assets.
Learning Objectives
- Understand the factors influencing currency demand and exchange rates.
- Analyze the impact of financial market panics on currency values.