In Keynes's liquidity preference framework
A)the demand for bonds must equal the supply of money.
B)the demand for money must equal the supply of bonds.
C)an excess demand of bonds implies an excess demand for money.
D)an excess supply of bonds implies an excess demand for money.

Question

Quizplus · Accepted Answer

In Keynes's liquidity preference framework, an excess supply of bonds implies that the demand for money exceeds the supply. This is because people will sell their bonds to acquire more money, leading to an excess demand for money. Therefore, choice D - an excess supply of bonds implies an excess demand for money - is the correct answer.

In Keynes's Liquidity Preference Framework