Answer the questions below based on the following statements.

“The dollar weakened against all major currencies, breaking out of the range since late October 2008, at that time, when global stock and bond markets were unbalanced, nervous investors rushed to buy dollars as.”

“The reversal also could signal a modest stabilization for the global financial system, since investors became willing to take on some risk.”

“Of course, investors remain highly nervous. This week, yields on short-term Treasury bills touched zero.”

a. What would be the implication for the investors’ degree of risk aversion?

b. What is the impact on the value of the dollar when the Fed cuts interest rates? (In fact, on December 12, 2008, the Fed was pondering reducing the fed funds rate to just above 0%.)

c. What would happen to the value of the US dollar against the currencies of emerging economies that are experiencing worse economic conditions relative to the United States?