Today’s exchange rate between the yuan and the U.S. dollar is 6.40 yuan per dollar, and the central bank of China is buying U.S. dollars in the foreign exchange market. If the central bank of China...

Today’s exchange rate between the yuan and the

U.S. dollar is 6.40 yuan per dollar, and the central bank of China is buying U.S. dollars in the

foreign exchange market. If the central bank of

China did not purchase U.S. dollars would there

be excess demand or excess supply of U.S. dollars in the foreign exchange market? Would the

exchange rate remain at 6.40 yuan per U.S. dollar? If not, which currency would appreciate?