According to the ʺLiquidity Preferenceʺ Theory of the Rate of Interest

question 122

Multiple Choice

According to the ʺliquidity preferenceʺ theory of the rate of interest, if the supply of money increases, then,
Ceteris paribus, bond prices will

• A) fall as the rate of interest rises.
• B) rise as the rate of interest rises.
• C) fall as the rate of interest falls.
• D) rise as the rate of interest falls.
• E) stay the same.

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Definitions:

Import Demand Curves

Graphs showing the quantities of a good that an economy is willing to import at different price levels.

Export Supply Curves

Graphical representations showing the relationship between the price of goods in the international market and the quantity of those goods a country is willing to supply for export.

Domestic Quantity Supplied

The total amount of a good or service that is provided within a country's borders during a specific time period.

Domestic Quantity Demanded

The total amount of a product or service that consumers in a particular country are willing and able to purchase at a given price.