The loanable funds framework is easier to use when analyzing the effects of changes in ________,while the liquidity preference framework provides a simpler analysis of the effects from changes in income,the price level,and the supply of ________.
A) expected inflation; bonds
B) expected inflation; money
C) government budget deficits; bonds
D) the supply of money; bonds

Question

Quizplus · Accepted Answer

The loanable funds framework is primarily used to analyze the effects of changes in expected inflation, while the liquidity preference framework is used to analyze the effects of changes in income, the price level, and the supply of money. Therefore, option B is the most relevant choice, as it specifies changes in the supply of money - which can be analyzed using the liquidity preference framework.

The Loanable Funds Framework Is Easier to Use When Analyzing