In the Keynesian model, interest rates are determined by
A) aggregate demand and aggregate supply.
B) saving and investment.
C) the demand for and supply of money.
D) the velocity of money.

Question

Quizplus · Accepted Answer

In the Keynesian model, interest rates are determined by the demand for and supply of money. Specifically, the demand for money is determined by the desire to hold money for transactions and precautionary purposes, while the supply of money is determined by the actions of the central bank. The interaction of these two factors in the money market determines the interest rate.

In the Keynesian Model, Interest Rates Are Determined by