According to the Theory of Liquidity Preference, Tightening the Money

question 8

Multiple Choice

According to the theory of liquidity preference, tightening the money supply will ______ nominal interest rates in the short run, and, according to the Fisher effect, tightening the money supply will ______ nominal interest rates in the long run.

• A) increase; increase
• B) increase; decrease
• C) decrease; decrease
• D) decrease; increase

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Definitions:

Recall

The act of retrieving information or memories from the past, which are stored in the brain.

Method Of Loci

An ancient mnemonic technique that involves visualizing items to be remembered along a familiar path or location to enhance memory recall.

Retrieval

The process of getting something back, or accessing information stored in the memory.

Spatial Location

The specific position or area within a three-dimensional space where an object or person is located.