Assume the Money Market Is Initially in Equilibrium

question 36

Multiple Choice

Assume the money market is initially in equilibrium. If the price level increases, according to liquidity-preference theory, what is in excess and for how long?

• A) The supply of money is in excess until the interest rate increases.
• B) The supply of money is in excess until the interest rate decreases.
• C) The demand for money is in excess until the interest rate increases.
• D) The demand for money is in excess until the interest rate decreases.

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Definitions:

Profits and Losses

Financial terms representing the positive or negative financial outcomes resulting from a company's operations and activities.

LLP

Limited Liability Partnership, a partnership where some or all partners have limited liabilities, protecting individual partners from the debts of the partnership.

Net Income

The amount of profit that remains after subtracting all the costs, taxes, and expenses from total revenue.

Capital Account Balance

The amount recorded in a company's capital account, representing the net worth or equity of the owners in the business.