Now that weve built up some intuition about exchange rates, lets apply the principles more thoroughly In this question, we discuss the U S China exchange rate Officially, the Chinese government fixed this exchange rate for years at a time, but in this question, we treat it as a market rate that can...

a This is a fall in yuan demand Th ...

Now that weve built up some intuition about exchange rates, lets apply the principles more thoroughly. In

Question:

Now that we€™ve built up some intuition about exchange rates, let€™s apply the principles more thoroughly. In this question, we discuss the U.S.€“China Officially, the Chinese government fixed this for years at a time, but in this question, we treat it as a market rate that can change every day.
a. In the following figure, shift the appropriate curves to illustrate the effect of the following news story: Chinese factories sell poisonous dog food.

b. Does this news story raise or lower the price of the yuan? Does this strengthen or weaken the Chinese currency? Does this strengthen or weaken the U.S. dollar?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...