According to Liquidity-Preference Theory, Why Is the Money-Demand Curve Downward

question 76

Multiple Choice

According to liquidity-preference theory, why is the money-demand curve downward sloping?

• A) because interest rates rise as the Bank of Canada reduces the quantity of money demanded
• B) because interest rates fall as the Bank of Canada reduces the supply of money
• C) because people will want to hold less money as the cost of doing so falls
• D) because people will want to hold more money as the cost of doing so falls

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