Asked by
Kirby White
on Nov 16, 2024
Verified
According to the theory of liquidity preference,
A) an increase in the interest rate reduces the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the price level shifts money demand to the right.
B) an increase in the interest rate increases the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the price level shifts money demand leftward.
C) an increase in the price level reduces the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the interest rate shifts money demand rightward.
D) an increase in the price level increases the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the interest rate shifts money demand leftward.
Liquidity Preference Theory
A theory that suggests individuals prefer to have their resources in liquid form as opposed to investing in long-term assets, affecting interest rates and economic activity.
Money Demanded
The total amount of money that households and businesses wish to hold at any given interest rate, at a specific time.
- Fathom the connection between interest rates and the demand for monetary resources.
- Gain insights into the impact of changes in price levels on money demand and supply.
Verified Answer
TD
Learning Objectives
- Fathom the connection between interest rates and the demand for monetary resources.
- Gain insights into the impact of changes in price levels on money demand and supply.