A surplus or shortage in the money market is eliminated by adjustments in the price level according to
A)both liquidity preference theory and classical theory.
B)neither liquidity preference theory nor classical theory.
C)liquidity preference theory,but not classical theory.
D)classical theory,but not liquidity preference theory.

Question

Quizplus · Accepted Answer

In classical theory, the price level adjusts to eliminate any surplus or shortage in the money market, whereas liquidity preference theory focuses on interest rates rather than price level adjustments.

A Surplus or Shortage in the Money Market Is Eliminated