According to liquidity preference theory,the money-supply curve would shift rightward
A)if the money demand curve shifted right.
B)if the Federal Reserve chose to increase the money supply.
C)if the interest rate increased.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

According to liquidity preference theory, a rightward shift in the money-supply curve results from a deliberate policy decision by the Federal Reserve to increase the money supply. A rightward shift in the money demand curve would lead to an increase in interest rates, causing the quantity of money demanded to decrease, shifting the money-supply curve leftward. Therefore, A and C are incorrect.

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