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)if the price level increased.

Question

Quizplus · Accepted Answer

The liquidity preference theory suggests that the money-supply curve would shift rightward if the Federal Reserve (or central bank) chose to increase the money supply, as this action directly adds more money into the economy.

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