Problem
I. One journalist writing about the complex interactions between various markets in the economy stated: "When the government spends more than it takes in taxes it must sell bonds to finance its excess expenditures. But selling bonds drives interest rates down and thus stimulates the economy by encouraging more investment and decreasing the foreign exchange rate, which helps our export industries." Carefully analyze the statement. Do you agree? Why or why not?
II. Read this article "Understanding how monetary policy works" about understanding how monetary policy works and write an essay maximum 400 words and explain the role of all the channels in which changes in policy rate affect the economy.