ESSAY QUESTIONS

Q1) The Federal Reserve meets monthly to review the US economy status. We discussed monetary and fiscal policy. What is fiscal and monetary policy? Do interest rates affect fiscal policy, if so, how? Do interest rates affect monetary policy?

Q2) The Federal Reserve used quantitative measures to reduce the short term interest rates. How did the Fed reduce short term rates? The Japanese are using quantitative measures to reduce long interest rates. What mechanism are they using to reduce long rates? In your opinion did these measures help their respective economies?

Q3) Are foreign currencies are floating? Does that mean they do not sink? What makes currencies float? Using the GDP equation components, please explain and use examples, how the components affect the currency movements.