ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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current account
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financial/capital account
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official reserves account
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None of the above
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Detailed explanation-1: -Repercussions. The repercussions for China of such an offloading would be worse. An excess supply of U.S. dollars would lead to a decline in USD rates, making RMB valuations higher. It would increase the cost of Chinese products, making them lose their competitive price advantage.
Detailed explanation-2: -Investors in the Asian nation offloaded $12.6 billion of Treasuries last year, according to the latest data from the US Treasury Department, but that figure was dwarfed by a record $121.8 billion purchase of agency debt, higher-yielding securities still backed by the US government.
Detailed explanation-3: -If the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public. Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds.