In his liquidity preference framework,Keynes assumed that money has a zero rate of return; thus,when interest rates ________ the expected return on money falls relative to the expected return on bonds,causing the demand for money to ________.
A) rise; fall
B) rise; rise
C) fall; fall
D) fall; rise

Question

Quizplus · Accepted Answer

When interest rates rise, the return on bonds increases compared to the zero return on money, leading to a decrease in the demand for money as people prefer to hold bonds instead.

In His Liquidity Preference Framework,Keynes Assumed That Money Has a Zero