1. If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______. (choose - more,/less, imports/exports, fall/rise)

2. What is the political business cycle and how does it relate to whether the central bank should have discretion or use a rule?

3. Why is there a lag between the Fed’s actions and the economy’s response?

4. By law what goals are the Federal Reserve to pursue? What, if any, specific weights are given for these goals?

5. Economists believe that a little bit of inflation may be a good thing. What are the potential benefits of inflation?