Mixed 66.doc

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The Federal Open Market Committee __________.
A. is required by its charter to change the money supply using a complex formula that concerns the tradeoff between inflation and unemployment
B. operates with almost complete discretion over monetary policy
C. is required to increase the money supply by a given growth rate each year
D. is required to keep the interest rate within a range set by Congress

23) The part of the balance of payments account that records the amount of foreign currency the government buys or sells is the:

A. balance of trade.
B. current account.
C. financial and capital account.
D. government financial account.

24) Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of their contributions was to argue that if a central bank could convince people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. This possibility is known as __________.

A. the sacrifice ratio dilemma
B. inflation targeting
C. the monetary policy reaction lag
D. the time inconsistency of policy

25) In the market for foreign-currency exchange in the open economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars __________.

A. demanded for the purpose of importing foreign goods and services
B. supplied for the purpose of selling assets domestically
C. supplied for the purpose of buying assets abroad
D. demanded for the purpose of buying U.S. net exports of goods and services

26) The part of the balance of payments account that lists all long-term flows of payments is called the:

A. balance of trade.
B. current account.
C. financial and capital account.
D. government financial account.

27) The open-economy macroeconomic model examines the determination of
A. the trade balance and the exchange rate
B. the output growth rate and the real interest rate
C. unemployment and the exchange rate
D. the output growth rate and the inflation rate