Asked by
Paige Moore
on Nov 16, 2024
Verified
According to liquidity preference theory, the money-supply curve would shift rightward
A) if the money demand curve shifted right.
B) if the Federal Reserve chose to increase the money supply.
C) if the interest rate increased.
D) if the price level increased.
Money-Supply Curve
A graphical representation showing the relationship between the quantity of money in the economy and the price level or interest rate.
Federal Reserve
The central banking system of the United States, responsible for setting monetary policy, regulating banks, maintaining financial stability, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.
Interest Rate
The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.
- Acquire knowledge on how the Federal Reserve's measures affect the banking system's reserves, which in turn alter the money supply.
- Understand the theory of liquidity preference and its effects on the curve representing money supply.
Verified Answer
SM
Learning Objectives
- Acquire knowledge on how the Federal Reserve's measures affect the banking system's reserves, which in turn alter the money supply.
- Understand the theory of liquidity preference and its effects on the curve representing money supply.