According to Liquidity Preference Theory,the Slope of the Money Demand

question 65

Multiple Choice

According to liquidity preference theory,the slope of the money demand curve is explained as follows:

• A)Interest rates rise as the Fed reduces the quantity of money demanded.
• B)Interest rates fall as the Fed reduces the supply of money.
• C)People will want to hold less money as the cost of holding it falls.
• D)People will want to hold more money as the cost of holding it falls.

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Definitions:

Market Price

The present cost at which a service or asset is available for purchase or sale in the market.

Expected Dividend Rate

An estimate of the yearly dividend per share that a company plans to pay out to its shareholders.

Future Net Income

The projected earnings of a company after all expenses and taxes have been subtracted from revenue, indicating expected profitability.

Transferability of Ownership

The legal capability to transfer ownership rights of an asset or property from one entity to another.