According to Liquidity-Preference Theory, If the Quantity of Money Supplied

question 2

Multiple Choice

According to liquidity-preference theory, if the quantity of money supplied is greater than the quantity demanded, what will happen to the interest rate and the quantity of money demanded?

• A) The interest rate will increase, and the quantity of money demanded will decrease.
• B) The interest rate will increase, and the quantity of money demanded will increase.
• C) The interest rate will decrease, and the quantity of money demanded will decrease.
• D) The interest rate will decrease, and the quantity of money demanded will increase.

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Definitions:

Independent Plans

are strategies or courses of action devised and executed autonomously by an individual, organization, or country without external control or influence.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price over a certain period.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a given time period.

Surplus

The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific price.