Question

In: Economics

According to the theory of liquidity preference, the opportunity cost of holding money rises when the...

According to the theory of liquidity preference, the opportunity cost of holding money rises when the interest rate rises, so people desire to hold more of it.

Select one:

True

False

In the long run, changes in government spending can affect prices, output, and unemployment rates if the spending programs alter the availability of natural resources, capital equipment or technology

Select one:

True

False

According to liquidity preference theory, the money supply curve is vertical because the Fed can dictate the quantity of money supplied by engaging in the purchase and sale of government bonds.

Select one:

True

False

An increase in the interest rate induces firms to borrow less, which will result in less investment spending and a decrease in the aggregate demand for goods and services.

Select one:

True

False

A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded

Select one:

True

False

Solutions

Expert Solution

Q. According to the theory of liquidity preference, the opportunity cost of holding money rises when the interest rate rises, so people desire to hold more of it.

Answer- True

Q. In the long run, changes in government spending can affect prices, output, and unemployment rates if the spending programs alter the availability of natural resources, capital equipment or technology

Answer- True

Q. According to liquidity preference theory, the money supply curve is vertical because the Fed can dictate the quantity of money supplied by engaging in the purchase and sale of government bonds

Answer- True

Q. An increase in the interest rate induces firms to borrow less, which will result in less investment spending and a decrease in the aggregate demand for goods and services

Answer- True

Q. A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded

Answer- True

Rahul Sunny answered 5 months ago

Next > < Previous

Related Solutions

According to liquidity preference theory,a. an increase in the price level reduces the quantity of money...

According to liquidity preference theory,a. an increase in the price level reduces the quantity of money demanded. This is shown as a movement along the money-demand curve. An increase in the interest rate shifts money demand rightward.b. an increase in the interest rate reduces the quantity of money demanded. This is shown as a movement along the money-demand curve. An increase in the price level shifts money demand to the right.c. an increase in the interest rate increases the quantity...

According to liquidity preference theory, a decrease in money demand for some reason other than a...

According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes A. the interest rate to fall, so aggregate demand shifts right. B. the interest rate to fall, so aggregate demand shifts left. C. the interest rate to rise, so aggregate demand shifts right. D. the interest rate to rise, so aggregate demand shifts left.

Explain the Keynes’s Liquidity Preference Theory of money demand

The demand for money is one of the most important concepts in the Liquidity Preference Theory...

The demand for money is one of the most important concepts in the Liquidity Preference Theory of Interest. What are the three main components of the demand for money in this idea about how interest rates are determined?

According to the liquidity preference model: A. an increase in the money supply lowers the equilibrium...

According to the liquidity preference model: A. an increase in the money supply lowers the equilibrium rate of interest. B. the demand for money curve is a vertical line. C. the money supply curve is a horizontal line. D. a decrease in the money supply lowers the equilibrium rate of interest. A price floor or a price ceiling is an example of: A. market equilibrium price. B. a quota. C. a price control. D. a quantity control.

1. The medium of exchange function of money eliminates: A. the opportunity cost of holding money....

1. The medium of exchange function of money eliminates: A. the opportunity cost of holding money. B. barter, or the exchange of goods for goods. C. the need for chequing accounts. D. the need for currency. 2. Barter requires the existence of: A. the backing of the government. B. the double coincidence of wants. C. paper currency and coins. D. gold or silver.

Using Keynes liquidity preference theory, explain the link of demand for money with economic variables?

Keynesian Liquidity Preference Theory of Interest in Economics.

What is Keynesian Liquidity Preference Theory of Interest in Economics? Illustrate in detail. Critically explain this Liquidity Preference Theory of Interest .

The opportunity cost of holding money A. is measured by the alternative interest yield obtainable by...

The opportunity cost of holding money A. is measured by the alternative interest yield obtainable by holding some other asset. B. refers to the amount of paper currency held by the Fed. C. is based on the fiduciary monetary system. D. equals the amount paid for renting a house instead of buying it. An expansionary monetary policy results in lower interest rates, which in turn A. reduces the international price of the dollar and increases net exports. B. increases the...

What will the investor say about the future change of interest rate according to liquidity preference theory?

Suppose an investor observes a downward term structure of interest rate. What will the investor say about the future change of interest rate according to liquidity preference theory? Explain your argument. (10 marks)

Subjects