We have two countries, China and Nambia, with a fixed exchange rate trading at 1 yuan =
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Question:
We have two countries, China and Nambia, with a fixed exchange rate trading at 1 yuan = 20 Nambian dollars (N$). Last year, China. bought 200 billion N$ worth of goods, services and financial assets from Nambia, while Nambia bought 5 billion yuan from the China.
- What is the value of the Chinese balance of payments deficit?
- What is the value of the Nambian balance of payments surplus?
- What will both the Chinese and Nambian governments do in response (keeping in mind there is a fixed exchange rate system in both countries)?
- What effect will this have on domestic prices in China and Nambia?
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