In the simple liquidity preference model, if the money-demand curve is elastic, then:
A) small changes to the money supply will greatly affect interest rates.
B) only large changes to the money supply will greatly affect interest rates.
C) small changes to the money supply will minimally affect interest rates.
D) large changes to the money supply will minimally affect interest rates.

Question

Quizplus · Accepted Answer

If the money-demand curve is elastic, small changes in the money supply will result in small changes in interest rates because the quantity of money demanded is sensitive to changes in interest rates.

In the Simple Liquidity Preference Model, If the Money-Demand Curve