According to Which Theory Do Changes in the Interest Rate

question 35

Multiple Choice

According to which theory do changes in the interest rate bring the money market into equilibrium?

• A) purchasing-power parity theory
• B) the quantity theory of money
• C) liquidity-preference theory
• D) the real business cycles theory

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Definitions:

Zero-balance Account

A checking account set up to maintain a balance of zero by automatically transferring funds from a master account in the exact amount of transactions.

Miller-Orr Model

A financial model used for managing cash balances by setting upper and lower limits on cash reserves.

Upper Cash Limit

The maximum cash balance a company sets to hold on hand, beyond which excess funds are usually invested in short-term securities.

Lockbox Services

Banking services that process payments for companies by collecting and depositing checks into their accounts.