Question 1

a) In recent years, the government has increased its role in financial markets. So explain the government intervention in financial markets with suitable examples.

b) The federal open market committee assesses the economic conditions, and identifies its main concerns about the economy to determine the monetary policy that would alleviate its concerns. Its monetary policy changes the money supply in order to influence interestrates, which affect the level of aggregate borrowing and spending by households andfirms. In the spectrum explain the effects of a stimulative monetary policy. Also explain why a stimulative monetary policy might fail.

Question 2

a) Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities. Money markets enable financial market participants to maintain liquidity. Give a detailed discussion about the money market securities.