Evaluate whether each of the following statements is true or false. Explain your answer and provide supporting rationale, using graphs to support your answer. You can create graphs by hand and take pictures and upload them with your answers, or you may use Word or Excel, and upload the file created by these software packages.
If the real money demand is greater than the real money supply, interest rates must rise to reach equilibrium in the money market as institutions sell bonds to obtain more money.
The federal government’s control of the money supply, which influences interest rates, is the primary tool that policy makers use to impact the macro economy.
A decrease in the reserve requirement decreases the money supply because banks have fewer reserves.
The real money demand curve shows how households and businesses change their spending in response to changes in the interest rate.
Both an increase in the nominal money supply by the Federal Reserve and an increase in the price level will cause the real money supply curve to shift to the right.