According to Liquidity-Preference Theory, If the Price Level Increases, How

question 113

Multiple Choice

According to liquidity-preference theory, if the price level increases, how do the equilibrium interest rate and the aggregate quantity of goods change?

• A) The interest rate and the quantity demanded rise.
• B) The interest rate rises and the quantity demanded falls.
• C) The interest rate falls and the quantity demanded rises.
• D) The interest rate and the quantity demanded fall.

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Definitions:

Short-Term Memories

Memory system that holds small amounts of information for brief periods, allowing for immediate recall and processing.

Sensory Memory

The shortest-term element of memory, which acts as a buffer for stimuli received through the senses, lasting up to a couple of seconds.

Effortful Memory

A type of memory that requires conscious effort and attention to encode and recall information, opposed to automatic memory processes.

Procedural Memory

A type of long-term memory responsible for knowing how to perform different actions and skills, essentially the memory of how to do things.