Liquidity Preference Theory Is Most Relevant to the

question 60

Multiple Choice

Liquidity preference theory is most relevant to the

• A)short run and supposes that the price level adjusts to bring money supply and money demand into balance.
• B)short run and supposes that the interest rate adjusts to bring money supply and money demand into balance.
• C)long run and supposes that the price level adjusts to bring money supply and money demand into balance.
• D)long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

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Definitions:

Marginal Cost

The elevation in aggregate expenditure triggered by the output of one supplementary unit of a good or service.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Sales Revenue

The total amount of money generated from the sale of goods or services before any costs or expenses are deducted.

Opportunity Cost

The expense incurred by not choosing the second-best option available during decision-making.