According to the Liquidity-Preference Theory, How Does an Increase in the Price

question 60

Multiple Choice

According to the liquidity-preference theory, how does an increase in the price level affect the interest rate?

• A) It increases the money demand and the interest rate.
• B) It lowers the money demand and the interest rate.
• C) It increases the money demand and lowers the interest rate.
• D) It lowers the money demand and increases the interest rate.

---

Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thus preparing the books for the next period.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a period, transferring the net amount to retained earnings.

Sales Returns

Transactions where customers return defective, unsatisfactory or unwanted products back to the seller, resulting in a reversal of revenue.

Accounts Receivable

Financial obligations of customers towards a business for delivered but unpaid goods or services.