1. Evaluate the following statement: "In a financially integrated world in which funds can move instantly between national financial markets, fixed exchange rates cannot be credibly maintained over the long run."
2. How in practice does the Federal Reserve raise interest rates? In particular, what is the specific interest rate it targets, and what action does it take to change this rate? Briefly explain how the Federal Reserve's raising of interest rates affects household consumption, private savings, business investment, economic growth, and inflation in the short run.