The short-run effects on the interest rate are
A)shown equally well using either liquidity preference theory or classical theory.
B)best shown using classical theory.
C)best shown using liquidity preference theory.
D)not shown well by either liquidity preference theory or classical theory.

Question

Quizplus · Accepted Answer

The short-run effects on the interest rate are best shown using liquidity preference theory, as it takes into account the demand for money and the supply of money in short-run fluctuations. Classical theory, on the other hand, focuses on long-run movements in interest rates based on the real factors of production and the general price level, and may not necessarily fully capture the short-run effects on interest rates.

The Short-Run Effects on the Interest Rate Are