According to Liquidity-Preference Theory, What Action Taken by the Bank

question 24

Multiple Choice

According to liquidity-preference theory, what action taken by the Bank of Canada would shift the money-supply curve?

• A) if the Bank of Canada engaged in arbitrage
• B) if the Bank of Canada changed the inflation rate
• C) if the Bank of Canada changed the exchange rate
• D) if the Bank of Canada engaged in open-market transactions

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Definitions:

Rate of Return

Variation in the worth of an investment over a specific interval, depicted as a percentage of the investment's initial outlay.

Discount Rate

The interest rate used to discount future cash flows to their present values.

Present Value

The current financial assessment of a sum of money in the future or ongoing cash flows, based on a specific rate of return.

Cash Flows

The movement of money into and out of a business, project, or financial product.