Foreign Investment

I read in an article: "When asian banks buy government debt in the form of T-Bills, it helps keep interest rates at an all time low even as the united states has massive deficits." How? Why? Is it because the foreign investors have to buy american dollars in order to invest in american t-bills, which increases the exchange rate.. but how does this affect the interest rates? Does it just mean that they have no incentive to raise them since they do not need to attract extra investment? But then I'm also confused because if the government sells securities in the form of t-bills.. doesn't it mean that the money supply goes down since the government is collecting this money, therefore c... click for more

interest rate

-------------------------------------------------------------------------------- If the monetary authority wants to stimulate an economy in a recession, it often reduces interest rates, and if the inflation rate is low, as it has been in the early part of the current decade, these interest rates can become very low. How effective is this monetary policy if the demand for loans is shrinking, even at a very low interest rate? Why would demand for loans decline if interest rates are declining?

GDP and unemployment

In a monetary policy designed to slow inflation, what are the risks to other macroeconomic measures such as real GDP and unemployment? How can the monetary authority mitigate these risks?

Suppose the federal reserve purchased gold or foreign currency, how would this purchase affect the domestic money supply?

Suppose the federal reserve purchased gold or foreign currency, how would this purchase affect the domestic money supply?

Foreign Exchange Rates and portfolio adjustments

This question regards international finance specifically the asset market model and exchange rates. Assume the spot exchange rate between dollars and yen is e=$1/100yen. The interest rate on a 180 day dollar denominated assets is i($)=1% and the interest rate on comparable 180 day yen denominated assets is also i(yen)= 1%. The 180 day forward exchange rate between dollars and yen if e(forward)=$1/90 yen. I don't understand what (and why), if any, adjustments I should make to my portfolio. Specifically, what should I do if I'm risk adverse? What if I don't mind bearing exchange rate risk?