According to liquidity-preference theory, when would the money-supply curve shift right?
A) if government spending increased
B) only if the Bank of Canada chose to increase the money supply
C) if the interest rate decreased
D) if the price level fell

Question

Quizplus · Accepted Answer

According to liquidity-preference theory, the money-supply curve is determined by the decisions of the central bank, such as the Bank of Canada in Canada. Therefore, the money-supply curve can only shift right if the Bank of Canada chooses to increase the money supply. The other options listed may impact other economic variables, such as aggregate demand or the demand for money, but they do not directly lead to a shift in the money-supply curve.

According to Liquidity-Preference Theory, When Would the Money-Supply Curve Shift