The Theory of Liquidity Preference Implies That

question 99

Multiple Choice

The theory of liquidity preference implies that:

• A) as the interest rate rises, the demand for real balances will fall.
• B) as the interest rate rises, the demand for real balances will rise.
• C) the interest rate will have no effect on the demand for real balances.
• D) as the interest rate rises, income will rise.

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Definitions:

Market Penetration

A metric showing the extent of purchases or uptake of a product or service against the total possible market for it.

Market Development

A business growth strategy focusing on increasing sales of existing products to new markets or demographic segments.

Diversification

The strategy of increasing the variety of products or markets to reduce risk.

Diversification

The strategy of entering into new markets or creating new products to spread and reduce risks.