The Idea That the Interest Rate Is Determined by the Supply

question 92

Multiple Choice

The idea that the interest rate is determined by the supply and demand for money is known as:

• A) the liquidity preference model.
• B) the quantity theory of money.
• C) the monetarist theory.
• D) the loanable funds theory.

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Definitions:

Depository Institutions Deregulation and Monetary Control Act

A United States federal law enacted in 1980 aimed at improving the efficiency of the financial institutions system and enhancing the control of the money supply.

Reserve Requirements

Regulations set by central banks requiring commercial banks to hold a certain percentage of their deposits in reserve as cash in their vaults or as deposits with the central bank.

President of the United States

The head of state and head of government of the United States, elected to a four-year term and serving as the executive leader of the federal government and commander-in-chief of the United States Armed Forces.

Board of Governors

The Board of Governors is the executive leadership of a central bank or other regulatory institution responsible for setting policies, overseeing operations, and guiding the organization’s objectives.