Liquidity Preference Theory Is Most Relevant to the

question 60

Multiple Choice

Liquidity preference theory is most relevant to the

• A)short run and supposes that the price level adjusts to bring money supply and money demand into balance.
• B)short run and supposes that the interest rate adjusts to bring money supply and money demand into balance.
• C)long run and supposes that the price level adjusts to bring money supply and money demand into balance.
• D)long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

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Definitions:

Optimum Order

The most efficient quantity of an item to order, minimizing costs and meeting demand.

Ordering Costs

Expenses related to ordering and receiving materials, including costs for placing orders, shipping, and handling.

Carrying Costs

Expenses associated with holding inventory, including storage, insurance, taxes, depreciation, and opportunity costs.

Economic Order Quantity

A formula that calculates the optimal order size to minimize the sum of ordering, carrying, and stockout costs.