The Theory of Liquidity Preference Assumes That the Nominal Supply

question 21

Multiple Choice

The theory of liquidity preference assumes that the nominal supply of money is determined by the

• A)level of real output only.
• B)interest rate only.
• C)level of real output and by the interest rate.
• D)Federal Reserve.

---

Definitions:

Balance Sheet

A financial overview indicating a firm's holdings, debts, and shareholders' net value on a specific day.

Accounting Equation

The fundamental formula in accounting that states assets equal liabilities plus shareholders' equity, representing a company's financial position.

Owner's Equity

The total value that would accrue to a business's owners after all liabilities are subtracted from all assets; also known as shareholder's equity or net worth.

Liabilities

Economic debts or obligations a company is responsible for, which are to be paid off over time through the exchange of economic advantages.