Domestic Inflation Reflects Domestic Monetary Policy.

A Second Reason Why Science Cannot Replace Judgement Is The Behavior Of Financial Markets.

Although Economists Have Studied The Sensitivity Of Import And Export Volumes To Changes In The Exchange Rate, There Is Still Much Uncertainty About Just How Much The Dollar Must Change To Bring About Any Given Reduction In Our Trade Deficit.

The Price Of Imported Oil In The Us Doubled Between Summer 2003 And Summer 2005, Reducing Consumers' Purchasing Power By More Than 1 Per Cent Of Gross Domestic Product.

But The Primary Reason For Wanting The Dollar To Become More Competitive In The Near Future Is That We May Need An Increase In Exports This Year And In 2007 To Sustain The Economy's Current Pace Of Expansion.

Increased Government Spending Can Provide A Temporary Stimulus To Demand And Output But In The Longer Run Higher Levels Of Government Spending Crowd Out Private Investment Or Require Higher Taxes That Weaken Growth By Reducing Incentives To Save, Invest, Innovate, And Work.