Q1. The LoJack car recovery system allows the police to track stolen cars. As a result, they not only recover 90 percent of LoJack-equipped cars that are stolen but also arrest many auto thieves and shut down many "chop shops" that take apart stolen vehicles to get at their used parts. Thus, LoJack provides both private benefits and positive externalities. Should the government consider subsidizing LoJack purchases? Why.
Q2. If the Federal Reserve adopts a restrictive monetary policy that leads to relatively high interest ratesin United States, what happens to the demand and supply of foreign currency and the dollar's exchange value?