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Hong Kong is has a “currency board” system. This means they have a fixed exchange rate...

Hong Kong is has a “currency board” system. This means they have a fixed exchange rate regime with free flows of capital. In fact, the Hong Kong dollar has been pegged to the U.S. dollar at an exchange rate of HK$7.80 = US$1 (unlike mainland China, which has a different currency).   In 2017, Hong Kong had a more than US$32 billion trade deficit with the United States. Thinking about the balance of payments structure, discuss three different ways that this exchange rate could remain stable in spite of this deficit.

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