According to Liquidity Preference Theory, If There Were a Surplus

question 87

Multiple Choice

According to liquidity preference theory, if there were a surplus of money, then

• A)the interest rate would be above equilibrium and the quantity of money demanded would be too large for equilibrium.
• B)the interest rate would be above equilibrium and the quantity of money demanded would be too small for equilibrium.
• C)the interest rate would be below equilibrium and the quantity of money demanded would be too small for equilibrium.
• D)the interest rate would be below equilibrium and the quantity of money demanded would be too large for equilibrium.

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Definitions:

Security Needs

The requirement for physical and emotional safety and stability, considered a fundamental human need driving behavior and decision-making.

Relative Pay

Comparison of the compensation package of one employee to those of others within the same organization or industry.

Internal Equity

Refers to the fairness and consistency in pay structures for employees within the same company, ensuring equitable compensation for similar roles and responsibilities.

Salary

A fixed amount of money paid to an employee, usually on a monthly or annual basis, in exchange for their work.