The Theory of Liquidity Preference Illustrates the Principle That

question 91

Multiple Choice

The theory of liquidity preference illustrates the principle that

• A)monetary policy can be described either in terms of the money supply or in terms of the interest rate.
• B)monetary policy can be described either in terms of the exchange rate or the interest rate.
• C)monetary policy must be described in terms of the money supply.
• D)monetary policy must be described in terms of the interest rate.

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Definitions:

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price level.

Quantity Demanded

The total amount of goods or services that consumers are willing and able to purchase at a given price level.

Equilibrium Quantity

The quantity of goods or services supplied that is equal to the quantity demanded at the market equilibrium price.

Rent Control

Governmental regulation of the amount landlords can charge for residential housing, intended to make housing more affordable.