According to Liquidity-Preference Theory, How Does an Increase in the Price

question 29

Multiple Choice

According to liquidity-preference theory, how does an increase in the price level affect the interest rate and output demanded, respectively?

• A) The interest rate increases, and output demanded increases.
• B) The interest rate increases, and output demanded decreases.
• C) The interest rate decreases, and output demanded increases.
• D) The interest rate decreases, and output demanded decreases.

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