According to the Theory of Liquidity Preference, What Does an Increase

question 1

Multiple Choice

According to the theory of liquidity preference, what does an increase in the price level cause the interest rate and investment to do?

• A) It causes both the interest rate and investment to rise.
• B) It causes both the interest rate and investment to fall.
• C) It causes the interest rate to rise and investment to fall.
• D) It causes the interest rate to fall and investment to rise.

---

Definitions:

Content Validity

The extent to which a test measures all facets of the concept it is intended to assess.

External Validity

The extent to which the results of a study can be generalized to other situations, populations, or settings.

Alternate Form Reliability

A measure of consistency where different versions of a test produce similar results, indicating the test’s reliability over time.

Concurrent Validity

A measure of how well a particular test correlates with a previously validated measure taken at the same time.