1) If the unemployment rate is falling from 4 to 3%, while the inflation rate is increasing to 5%, the Fed mos likely:

a. increase the target for the federal funds.

b. decrease the inflation rate by setting a price ceiling.

c. increase the money supply.

d. does not change much.

e. decrease the target for the federal funds rate.

2) If the Fed lowers the interest rate, the value of US dollars will...... which lead to a(n) ...... in spending on US goods.

a. increase, decrease

b. decrease, increase

c. decrease, decrease

d. increase, increase