According to liquidity preference theory, an increase in money demand for some reason other than a change in the price level causes
A. the interest rate to fall so aggregate demand shifts right.
B. the interest rate to fall so aggregate demand shifts left.
C. the interest rate to rise so aggregate demand shifts right.
D. the interest rate to rise so aggregate demand shifts left.
According to liquidity preference theory,
A. an increase in the interest rate reduces the quantity of money demanded. This is shown as a movement along the curve. An increase in the price level shifts money demand right.
B. an increase in the interest rate increases the quantity of money demanded. This is shown as a movement along the curve. An increase in the price level shifts money demand left.
C. an increase in the price level reduces the quantity of money demanded. This is shown as a movement along the curve. An increase in the interest rate shifts money demand right.
D. an increase in the price level increases the quantity of money demanded. This is shown as a movement along the curve. An increase in the interest rate shifts money demand left.
According to the theory of liquidity preference, which variable adjusts to balance the supply and demand for money?
A. interest rate
B. money supply
C. quantity of output
D. price level
Refer to Figure 1. There is excess money demand at an interest rate of
A. 2 percent.
B. 3 percent.
C. 4 percent.
D. None of the above is correct.
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