1. The Fed adopts an easier monetary policy. How is this likely to affect the value of the dollar and U.S. interest rates?

2. Comment on the following headline from the New York Times. ‘‘Germany Raises Interest Rate, and Value of Dollar Declines'' (October 10, 1997).

3. In the 1995 election for the French presidency, the Socialist candidate, Lionel Jospin, vowed to halt all privatizations, raise taxes on business, spend heavily on job creation, and cut the workweek without a matching pay cut. At the time Jospin made this vow, he was running neck-and-neck with the conservative Prime Minister Jacques Chirac, who espoused free-market policies.

a. How do you think the French franc responded to Jospin's remarks?

b. In the event, Chirac won the election. What was the franc's likely reaction?