Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

Suppose the current account of a country is initially in balance. A new transaction occurs so that the current account is now in surplus. Official reserve balance is maintained before and after the transaction occurs. From this, we know that

A) the balance of trade is now in surplus. B) the balance of goods and services is now in surplus. C) the financial account is now in deficit. D) the government must make official reserve transactions.

Which of the following statements is true?

A. The Federal Reserve sets the federal funds rate. B. The Federal Reserve sets the target for the federal funds rate, and then uses the reserve ratio to push banks toward that target. C. The Federal Reserve does not set the federal funds rate, but it influences it through the use of its open-market operations. D. The Federal Reserve will set a higher target for the federal funds rate if pursuing an expansionary monetary policy.