Chapter 7

http://www.canada.com/windsorstar/news/business/story.html?id=33448932-b05d-4841-9f6e-a3c4e15eb97c&k=86761
Summary
In New York in the states, the economy there has recently been in risk of going into a recession. Thus, the Federal government did major reductions on interest rates. This has affected some businesses and households when the cuts were announced. Also, there were recent information which shows that there's a deepening of housing contraction. The government hopes that by making a series of interest rate cuts, it will keep the economy from going down right into a recession. Most economists predicted that the short-term interest rate will be cut by a 50 basis points to three percent; however, the reduction came to a surprise of 75 basis point cut when the stocks in the states headed to a significant selloff ami global stock market turmoil. Since then, the interest rate has dropped right down to 2.25%. Because of the downward slope on interest rates, price pressures on some goods affected many, thus the officials acknowledge these price raises and expected inflation, which can help increase the supply of money in the economy. In the article, it has also stated that the two mainfactors that can keep the United States out of a recession will be the healthiness of the labour market and consumers' ability to increase their spendings enough to eliminate the weakness in other parts of the economy.

Relation to the chapter
In the chapter, it has mentioned how the government uses the monetary policy to eliminate inflation and unemployment rate. This is the influence of interest rates, it acts like a stimulant or a . In this particular article, since US governemnt is trying to stop US from going into recession, monetary policy has came into affect. By influencing the interest rates, this can stimulate the spendings of consumers and increase the supply of money circulation in the economy. Having the economic activites increase, the economy in US will improve.

Personal Reflection
I think one of the main reasons to why the US is heading to recession is because of the war they are in right now. The government is spending too much into military and other criterias. It is evident that the major reductions in interest rates have affected many items in the market, like our basic foods such as eggs, oil and rice. I remember last time when i went to the states in march 2008. I was in walmart, and there was a sign up saying" consumers are only allowed to purchase 2 boxes of eggs". I was wondering why, and until now i have found out this is all because of the US economy's hitting the red. Luckily, Canada's economy hasn't been influenced much by the US. But I think that the US economy will improve and will not be in risk as to heading to recession very soon.

Chapter 6

http://www.nationalpost.com/rss/Story.html?id=253921

Summary
The Bank Of Canada is expecting to cut interest rates so that it can help ease the fears in the markets and prevent the US economy from taking Canadian stocks down following it. Bush quickly attempts to create an economic boon in US with the fiscal policy, he decreased the interest. This makes canadian economists predicts that the Bank of Canada will also lower the rates by 4% in January 2008, and by March 2008 it will be a 3.75% cut in rates. Benjamin Tal states that there is no choice, and having interest cuts are inevitable in order to balance out the economy. Market volatility has grown stronger since there are fears of global recession around. Moreover, the economy in Europe has grown a lot slower. He also stated that "credit crunch" is the number one cause for the cutting down on rates because US economy is gradually decreasing in speed of growth, there are obviously difficulties in that market. Because of this, investors can foresee that the percentage of rate cuts will increase.

Relation to the chapter
Cutting down on interest rates do relates to the chapter, because this is a factor that causes a countrie's GDP to change. Usually the economy in a country is doing bad, they can decrease interest rates, just like how the situation it's talking about in this article. The reason to this is because having the interest rates decrease, less people will want to save money in their banks, and they will be attracted to take out the money and spend more into the economy. This is one of the fiscal policies which governments follow in which the article has also mentioned.

Relfection
I personally think this is a really good way to boost the economy up, or to prevent it from going into a recession for this situation. I consider this a very good and smart strategy. In daily lives, i can also see the interest rates going up and down all the time, and i have always wondered why? What causes interests rates to go up and down? How does this affect us? After all these years, i finally got my answer. This all relates to the economy of one's country, and how it acts as a stimulant to the growth of economy.