According to the theory of liquidity preference, the supply of real money balances:
A)decreases as the interest rate increases.
B)increases as the interest rate increases.
C)increases as income increases.
D)is fixed by the central bank.

Question

Quizplus · Accepted Answer

The theory of liquidity preference suggests that the supply of real money balances is fixed by the central bank and does not change with interest rates or income levels.

According to the Theory of Liquidity Preference, the Supply of Real