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             The fiscal measures of tax reduction can induce consumers to spend more as their purchasing power increases. The government literally puts more money into the hands of consumers to encourage them to spend more which might result in higher production. However these measures do not always work but if carefully planned, they can have a good impact on economic conditions in the country. In the United States, for example, we noticed that government reduced interest rates 11 times after September 11, to increase consumer spending and raise borrowing activity (Berry, 2001). However it is believed that when fiscal measures are not carefully planned, no desired results can be achieved. This is what happened when frequent tax reduction announcements and cuts in fund rates failed to bring about any positive changes in business activity in the country and many corporation feel one after the other. Fiscal measures should therefore be adequately supported by other means such as increase in deficit and careful budget allocation or else exchange rate is seriously hurt as dollar tumbles against other powerful currencies including Yen and Euro. .

             This is an important concept which must be understood to see how fiscal measures affect value of dollar and how increase and decrease in the latter can affect the economic conditions. As we already mentioned above that tax reduction is not always followed by other important measures, this can negatively affect the value of dollar. If dollar becomes weaker, GDP growth suffers, as revenues earned from exports are not adequate which can have a profound impact on profits of business corporations in the country. While United States has been using both monetary and fiscal measures to control economic conditions in the country, it appears that its fiscal policies have been far more successful than monetary policy. Usually the main problem with monetary measures is that they can often lead to a huge drop in inflation, causing a major economic downturn.