Assume the money market is initially in equilibrium.If the price level increases,then according to liquidity preference theory there is an excess
A)supply of money until the interest rate increases.
B)supply of money until the interest rate decreases.
C)demand for money until the interest rate increases.
D)demand for money until the interest rate decreases.

Question

Quizplus · Accepted Answer

According to liquidity preference theory, an increase in the price level raises the demand for money, creating an excess demand for money until the interest rate increases to restore equilibrium.

Assume the Money Market Is Initially in Equilibrium