According to Liquidity Preference Theory,a Decrease in the Price Level

question 22

Multiple Choice

According to liquidity preference theory,a decrease in the price level shifts the

• A)money demand curve rightward,so the interest rate increases.
• B)money demand curve rightward,so the interest rate decreases.
• C)money demand curve leftward,so the interest rate decreases.
• D)money demand curve leftward,so the interest rate increases.

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Definitions:

Corrective Tax

A tax designed to induce private decision makers to take into account the social costs that arise from a negative externality.

Externality

A side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in market prices.

National Defense

Governmental and military actions and policies aimed at protecting a country from external aggression, threats, and maintaining national security.

Patented Invention

A unique product or process that has been legally protected by a patent to give its inventor exclusive rights to use, make, or sell it for a certain period of time.