According to the Theory of Liquidity Preference, the Supply of Real

question 49

Multiple Choice

According to the theory of liquidity preference, the supply of real money balances:

• A)decreases as the interest rate increases.
• B)increases as the interest rate increases.
• C)increases as income increases.
• D)is fixed by the central bank.

---

Definitions:

Bond Market Analyst

A financial professional who evaluates and interprets bond market data to forecast bond price movements and interest rate trends.

Price Sensitivity

The degree to which the price of a product or service affects consumers' purchasing behaviors or the quantity demanded.

Price Volatility

The rate at which the price of a security increases or decreases for a given set of returns.

Rising Interest Rates

A condition in the economy where the cost of borrowing money increases over time, usually as a result of central banking policies aimed at controlling inflation.