According to the Theory of Liquidity Preference, Decreasing the Money

question 63

Multiple Choice

According to the theory of liquidity preference, decreasing the money supply will _____ nominal interest rates in the short run, and, according to the Fisher effect, decreasing the money supply will _____ nominal interest rates in the long run.

• A)increase; increase
• B)increase; decrease
• C)decrease; decrease
• D)decrease; increase

---

Definitions:

Tobacco Sales

The commercial activity of selling products made from the dried leaves of the tobacco plant, such as cigarettes.

Political Party

An organized group of individuals with common values and beliefs, working together to gain political power and influence public policy.

Inhalants

Substances, often volatile, that produce chemical vapors which can be inhaled to induce a psychoactive, or mind-altering, effect.

Aerosols

Small particles or droplets suspended in air, often used to refer to pollutants or propellants in sprays.