1)ExplainhowanappreciationoftheUS$canbeexpectedtoimpacteconomic growth, interest rates and the stock market in the US.

2)Assumethatthestockmarketbeginsaperiodofsustainedincreasesaftera pause. Outline an options strategy that would help someone benefit from this improvement in the stock market and how this should work.

3)Duringthepandemiccrisis,thefederalgovernmentsentoutchecksforahostof programs. An administrator for one of these programs commented: "These tax checks should help keep interest rates low or help them decline even further from their current levels." Critically evaluate this statement (i.e., true, false, and why).

4)Firmsuselong-terminterestrateswhenmakinginvestmentdecisions(for equipment, software and structures). When the Fed lowers its fed funds rate target (in more normal times), can this affect these investment decisions? Briefly explain your answer.

1) Economic growth will decrease, interest rate will decrease , and increase in stock prices

2) The option strategy would be to sell the stock when the sell price of stock exceeds the price at which stock was purchased by a good number.

3) The given statement is false.

4) Investors will be less likely to invest with the lower interest rate but businesses will invite more investment.

Step-by-step explanation

1) Explain how an appreciation of the US $ can be expected to impact economic growth, interest rates and the stock market in the US.

Appreciation of the US $ means that the value of US $ has increased as compared to other currencies, which means that US people need less money to exchange their money for some another currency and foreign people need more domestic currency to have one 1$.

This will make imports cheaper and exports expensive, which will lead to a fall in the net exports of US. This will result in the slowdown in the economic growth of the US.

There would be a fall in the interest rate to recover the economic slowdown, as a fall in the interest rate will encourage domestic economic activities by increasing borrowings and investment. The another reason of this fall in the interest rate is that currency appreciation decreases the inflation pressure in the economy, which requires a fall in the interest rate.

Since stock prices and interest rate are negatively related to each other, a fall in the interest rate implies an increase in the stock price.

2) Assume that the stock market begins a period of sustained increases after a pause. Outline an options strategy that would help someone benefit from this improvement in the stock market and how this should work.

If there is an increase in the stock market then it means that there is an increase in the stock market trading or volume and investors are eager to buy. The option strategy would be to sell the stock when the sell price of stock exceeds the price at which stock was purchased by a good number. This will result in the capital gain.

3) During the pandemic crisis, the federal government sent out checks for a host of programs. An administrator for one of these programs commented: "These tax checks should help keep interest rates low or help them decline even further from their current levels." Critically evaluate this statement (i.e., true, false, and why).

The checks sent out by the federal government are stimulus checks provided to tax payers in order to boost the spending in the economy. These checks give money to people which they can use to buy goods and services. This will create demand in the economy and help in economic recovery.

There is no direct relationship of stimulus checks with the interest rate. Thus, the given statement is false.

4) Firms use long-term interest rates when making investment decisions(for equipment, software and structures). When the Fed lowers its fed funds rate target (in more normal times), can this affect these investment decisions? Briefly explain your answer.

If Fed lowers its fed funds rate target then it will decrease the nominal interest rate in the economy. This will lead to an increase in the investment in the economy, as investment is negatively related to the interest rate. It is because lower interest rate will encourage businesses to demand funds and invite investment because of the lower cost of investment.

Investors will be less likely to invest with the lower interest rate.