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

question 29

Multiple Choice

According to liquidity-preference theory, how does an increase 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.

---

Definitions:

Behaviour Origin

The source or cause of an individual's actions, often examined in psychology to understand motivations and personality.

Equity Theory

A theory in social psychology that explains how people strive for fairness and justice in social exchanges or give-and-take relationships, balancing the input they provide with the outcomes they receive.

Job Input

Refers to the various contributions, such as skills, effort, and time, that an employee provides to their job role or task.

Evaluative Tendency

A cognitive bias or predisposition towards assessing or judging situations, individuals, or objects in a particular way.