Assume that the interest rate on borrowings in india is 1 percent while the interest rate on bank deposits in a u. s. bank is 6 percent. john, an active currency trader, borrows in japanese yen, converts the money into u. s. dollars and deposits it in a u. s. bank. the speculative element of john's carry trade is that its success is based upon his belief that

Those who try to benefit from a carry trade are hoping to borrow money at a low interest rate so that they can invest in something that will provide a higher return. People commonly do this between different foreign exchange markets to make the most on their return from investing in different country currencies. 

The federal reserve took an expansionary approach during the crisis. this was done by expanding the money supply and boosting liquidity. this can be seen in the fed's actions of lending to banks, purchasing securities, and lowering the federal funds rate in order to lower overall interest rates. the fed's goal was to increase consumer spending and overall liquidity within the system, and they pursued this by expanding the supply of liquid money.