a. Consider an depreciation of the Chinese currency (Yuan) compared to the UAE dirham. Explain how...
a. Consider an depreciation of the Chinese currency (Yuan) compared to the UAE dirham. Explain how this depreciation affects the quantity of Chinese exports to the UAE. Explain
b. What would happen to exports and imports if the current fixed exchange rate was removed and the dirham (AED) was to appreciate on the exchange rate market against the dollar? Explain.
Homework Answers
1 - The depreciation of chinese yuan as compared to the dirham will make the currency of china cheaper as compared to the dirham. This means that now the goods and services of China will be cheaper than before. Hence exports of China will increase because of cheaper currency and value of goods and imports of China will decrease because Dirham will be more expensive now than before
2- The appreciation of the currency is related to the rise in value of currency as decided by the market forces. The appreciation of Dirham as compared to US dollar means that Dirham has now become more expensive than before. For US , now the goods in Dirham will be more expensive and they will be purchased lesser. Hence exports of Arab will decline and US dollar will be cheaper than before , hence the imports of good from US will increase for Arab.
Add Answer to:
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