Assume the Chinese monetary authorities are committed to maintaining the exchange rate of China’s currency the Yuan against the US$ between ${P_1}$ and ${P_2}$ on the diagram.
What might they do if demand changed from ${D_1}$ to ${D_2}$?
1 )
Impose controls on Chinese investment overseas.
2 )
Increase interest rates.
3 )
Sell US$ out of foreign exchange reserves.
Sell Yuan on the foreign exchange markets.
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