Keynes's liquidity preference theory indicates that the demand for money is ________ related to ________.
A)negatively;interest rates
B)positively;interest rates
C)negatively;income
D)negatively;wealth

Question

Quizplus · Accepted Answer

Keynes's liquidity preference theory suggests that the demand for money (liquidity) is negatively related to interest rates, meaning that as interest rates increase, the demand for money decreases. This is because people are more willing to hold money (instead of investing it) when interest rates are low, and thus demand for money increases when interest rates are high.

Keynes's Liquidity Preference Theory Indicates That the Demand for Money