When the exchange rate is 1 USD = 5 yuan a are cost $ 50,000 in U.S and 300,000 yuan in China and the price of a shirt is $20 in U.S and 120 yuan in China. US imports the shirt and exports the cars.
Now assume that the exchange rate is 1 yuan = 0.15 USD.
- Which currency has appreciated? why? and Identify two economic factors that can explain your answer to the above question
- Explain how a change in exchange rate of the U.S can affect the balance of trade of U.S