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Theory of Liquidity Preference: Interest Rate Adjustment
Chapter 34, Problem 1(choose chapter or problem)
According to the theory of liquidity preference, an economy’s interest rate adjusts
a. to balance the supply and demand for loanable funds.
b. to balance the supply and demand for money.
c. one-for-one to changes in expected inflation.
d. to equal the interest rate prevailing in world financial markets.
Questions & Answers
QUESTION:
According to the theory of liquidity preference, an economy’s interest rate adjusts
a. to balance the supply and demand for loanable funds.
b. to balance the supply and demand for money.
c. one-for-one to changes in expected inflation.
d. to equal the interest rate prevailing in world financial markets.
ANSWER:Step 1 of 2
The following discusses the theory of liquidity preference and finds out which among the options an economy’s interest rate adjusts.
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Theory of Liquidity Preference: Interest Rate Adjustment
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In this video, we explore the theory of liquidity preference, which focuses on how an economy's interest rate adjusts to balance supply and demand for money. We evaluate a multiple-choice question and discuss each option's alignment with various economic theories without revealing the correct answer.