According to the theory of liquidity preference,velocity is:
A) positively related to the interest rate.
B) negatively related to the interest rate.
C) independent of the interest rate.
D) equal to one divided by the interest rate.

Question

Quizplus · Accepted Answer

According to the theory of liquidity preference, as the interest rate increases, people prefer to hold less money and more interest-bearing assets, leading to an increase in the velocity of money.

According to the Theory of Liquidity Preference,velocity Is