According to Liquidity-Preference Theory, What Is the Shape of the Money-Supply

question 110

Multiple Choice

According to liquidity-preference theory, what is the shape of the money-supply curve?

• A) upward sloping
• B) downward sloping
• C) vertical
• D) horizontal

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Definitions:

Consumer Price Index

An index that measures the average change over time in the prices paid by consumers for a market basket of consumer goods and services.

Money Demand

The desire to hold cash or easily liquidated assets based on the trade-off between the liquidity they provide and the interest foregone by not investing.

Inflation

The speed at which the overall price level of goods and services increases, leading to a decline in the currency's buying power.

Relative Prices

The price of one good or service compared to another, often used to analyze choices and preferences in consumer behavior.