According to liquidity preference theory, if the price level decreases, then
a. the interest rate falls because money demand shifts right.
b. the interest rate falls because money demand shifts left.
c. the interest rate rises because money supply shifts right.
d. the interest rate rises because money supply shifts left.
b
You might also like to view...
Which of the following is a good example of efficient specialization and voluntary exchange?
A. A college professor hires someone to rototill his or her garden to ready it for spring planting. B. A college professor works on the engine of a car for a neighbor who is a mechanic. C. A lawyer decides to babysit his or her young child and agrees to do so for others for cash. D. A physician agrees to help a neighbor work on his or her income tax return in exchange for his or her bookkeeping services.
From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Federal Reserve would most likely
A) decrease interest rates. B) decrease income tax rates. C) increase interest rates. D) increase income tax rates.
When break-even investment is subtracted from investment per worker, the result is
A) the change in the capital-labor ratio. B) saving. C) the steady state. D) capital stock dilution.
Total expenditure equals total income
A) if firms do not save for future investment.
B) if firms earn zero profit.
C) because firms pay out everything they receive as income to the factors of production.
D) only if net taxes equals government expenditures on goods and services.
E) only if firms sell all the goods they produce in a given time period.