According to the Theory of Liquidity Preference, If the Supply

question 34

Multiple Choice

According to the theory of liquidity preference, if the supply of real money balances exceeds the demand for real money balances, individuals will:

• A) sell interest-earning assets in order to obtain non-interest-bearing money.
• B) purchase interest-earning assets in order to reduce holdings of non-interest-bearing money.
• C) purchase more goods and services.
• D) be content with their portfolios.

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Definitions:

Holder In Due Course

A legal term for someone who has acquired a negotiable instrument in good faith for value and without notice of any defect.

Negligent

The failure to exercise the care that a reasonably prudent person would exercise in similar circumstances, resulting in harm or damage.

Dishonored Checks

Checks that a bank refuses to pay or cash, typically because the account holder has insufficient funds.

Dishonor

In the context of finance, refers to the refusal or inability of a party to pay a debt when it is due.