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According to the theory of liquidity preference,if the interest rate rises
Money Supply
The aggregate sum of financial assets present within an economy at a certain moment, encompassing cash, coins, and the amounts in checking and savings accounts.
Inflation
A sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in purchasing power.
Crowding Out Effect
A situation where increased government spending leads to reduced investment in the private sector, often due to higher interest rates.
Government Borrowing
The process by which a government obtains funds from external sources, such as issuing bonds, to finance its expenditures that exceed its income.
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