According to Liquidity-Preference Theory, How Does a Decrease in the Price

question 115

Multiple Choice

According to liquidity-preference theory, how does a decrease in the price level affect the interest rate and output demanded, respectively?

• A) The interest rate increases, and output demanded increases.
• B) The interest rate increases, and output demanded decreases.
• C) The interest rate decreases, and output demanded increases.
• D) The interest rate decreases, and output demanded decreases.

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Definitions:

Levels of Processing Model

A theory that suggests memory retention is directly related to the depth of mental processing, with deeper levels of analysis leading to more meaningful connections and better recall.

Elaborative Rehearsal

A memory technique that involves thinking about the meaning of the term to be remembered, as opposed to simply repeating the term to oneself.

Maintenance Rehearsal

A cognitive strategy for keeping information active in short-term memory by repetitively verbalizing or thinking about the information.

Elaborative Rehearsal

A memory technique that involves thinking about the meaning of the information and making connections to other information in memory.