(a)[2]
Compare the inflation rate in China for 2007–2008 with that for 2010–2011.
(b)[3]
Explain briefly how the foreign exchange value of a currency is determined in a free market.
(c)[3]
The US Treasury report says that China’s strong trade surplus has created a ‘huge and rising stock of foreign exchange reserves’ in China. Explain how this supports the claim that China is manipulating the foreign exchange value of its own currency.
(d)[6]
Explain why China’s current account surplus is expected to increase in 2013, despite higher prices in China and the appreciation of the yuan.
(e)[6]
Do you agree with the US Treasury’s view that an appreciating currency is ‘of overall benefit’ to China?