Which of the Following Is a Difference Between Keynes Liquidity

question 6

Multiple Choice

Which of the following is a difference between Keynes liquidity preference theory and the modern quantity theory of money?

• A) The modern quantity theory of money specifies 1 asset instead of 3 assets like the liquidity preference theory.
• B) The liquidity preference theory assumes the return on money to be 1, unlike the modern quantity theory of money.
• C) The liquidity preference theory assumes velocity to be constant, unlike the modern quantity theory of money.
• D) The modern quantity theory predicts that interest rate changes have little effect on money demand unlike the liquidity preference theory.

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