8. Macroeconomic factors that influence interest rate levels Apart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity—influence interest rates. Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false: Statements True False When the Fed increases the money supply, short-term interest rates tend to decline.       Actions that lower short-term interest rates will always lower long-term interest rates.       Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates.       The Federal Reserve’s ability to use monetary policy to control economic activity in the United States is limited because US interest rates are highly dependent on interest rates in other parts of the world.

12. Suppose that the money demand function is: d = 900 - 60i where r is the interest rate in percent. The money supply M is 3,000 and the price level P is fixed at 6. (optional) a. Graph the supply and demand for real money balances. Make sure to label all curves and axes. b. What is the equilibrium interest rate? What happens to the equilibrium interest rate if the supply of money is reduced from 3,000 to 2,400? Show your work. a. If the central bank wants the interest rate to be 3 percent, what money supply should it set? Show your work.

0 The Fed exerted downward pressure on interest rates by conducting open market sales which led to an increase in demand for interest sensitive goods such as consumer durables, housing, and investment in physical capital. The Fed exerted upward pressure on interest rates by conducting open market sales which led to an increase in demand for interest sensitive goods such as consumer durables, housing, and investment in physical capital. The Fed exerted downward pressure on interest rates by conducting open market purchases which led to an increase in demand for interest sensitive goods such as consumer durables, housing, and investment in physical capital, The Fed exerted upward pressure on interest rates by conducting open market purchases which led to an increase in demand for interest sensitive goods such as consumer durables, housing, and investment in physical capital. Question 24 3 Which of the following is the most plausible explanation for the shift in the aggregate demand curve…

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