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The liquidity-preference theory assumes that the interest rate adjusts to balance the money demand and supply, where the money supply is arbitrarily determined by the central bank. However, we have previously learned that the central bank controls the money supply precisely by changing the interest rate. How do you reconcile the liquidity-preference theory with using the interest rate as a monetary policy tool?
Strong Base
A strong base is a substance that can completely dissociate into its ions in aqueous solution, resulting in a high pH.
Weak Base
A base that does not fully dissociate in solution, resulting in a relatively low pH compared to strong bases.
pH
A scale used to specify the acidity or basicity of an aqueous solution, with values ranging from 0 (very acidic) to 14 (very basic), and 7 being neutral.
pH
A numerical scale ranging from 0 to 14 that determines the level of acidity or alkalinity in water-based solutions.
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