The table above gives data for the nation of Pearl, a small island in the South Pacific. The economy is at full employment when real GDP is

According to liquidity preference theory, an increase in the price level would ________

A) increase the demand for real money balances B) decrease the supply of real money balances C) decrease the real interest rate D) all of the above E) none of the above

The precautionary demand for holding money is when people hold money:

a. instead of near money. b. to transact purchases they expect to make. c. as insurance against unexpected needs. d. to speculate in the stock market. e. to take advantage of changes in interest rates.