According to liquidity preference theory, the slope of the money demand curve is explained as follows:
a. Interest rates rise as the Fed reduces the quantity of money demanded.
b. Interest rates fall as the Fed reduces the supply of money.
c. People will want to hold less money as the cost of holding it falls.
d. People will want to hold more money as the cost of holding it falls.
d
You might also like to view...
Which of the following tariffs resulted in worldwide retaliation against the United States during the Great Depression?
A) the Chicken tariff B) the Pasta Tariff C) the Smoot-Hawley tariff D) the Tariff of Abominations
Within the framework of the AS/AD model, which of the following is a true statement regarding short-run aggregate supply?
a. An increase in prices temporarily improves profit margins because important components of costs are fixed in the short run. b. An increase in prices leads to higher interest rates, which temporarily improves profit margins. c. An increase in prices leads to an expansion in the money supply, which stimulates additional output. d. An increase in prices increases real wage rates and thereby expands the size of the economy's resource base.