If the Chinese yuan has a floating exchange rate with the US dollar, US multinationals have...

If the Chinese yuan has a floating exchange rate with the US dollar,

US multinationals have no economic exposure
Chinese exporting firms do not face currency risk
Currency risk can lead to economic exposure

Solutions

Expert Solution

Answer - Option C

Currency risk can lead to economic exposure

This is because currently ,the Yuan is a pegged currency. If the floating system is applied , the exchange rates would start fluctuating leading to currency risk. Everyone will have to go through these risks. Hence Option C will be correct.

Rahul Sunny answered 2 years ago

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