China linked its exchange rate to the U.S. dollar which meant in ...

[lilldybug07]

China linked its exchange rate to the U.S. dollar which meant in the 2004-2007 period
 
  A) it appreciated against most other currencies, hurting its manufacturing competitiveness.
  B) it depreciated against most other currencies, making its products cheaper.
  C) it decreased the size of its merchandise trade surplus.
  D) it overvalued its currency, making it hard to attract foreign investment.

Question 2

Imagine that the economy is at a point that is above both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?
 
  A) The economy will stay at this level in the short run.
  B) The exchange rate will first drop to a point on the AA schedule.
  C) The exchange rate will first move to a point on the DD schedule.
  D) The AA-DD equilibrium will shift to the position of the economy.
  E) The exchange rate will first move left to a position on the AA schedule.

[dlook33]

Answer to Question 1

B

Answer to Question 2

B