Liquidity preference refers directly to Keynes' theory concerning
A)the effects of changes in money demand and supply on interest rates.
B)the effects of changes in money demand and supply on exchange rates.
C)the effects of wealth on expenditures.
D)the difference between temporary and permanent changes in income.

Question

Quizplus · Accepted Answer

Liquidity preference is the demand for money as a store of value or medium of exchange. Keynes' theory suggests that changes in the demand and supply of money can affect interest rates, which in turn can affect investment and consumption decisions. Therefore, liquidity preference theory is directly related to the effects of changes in money demand and supply on interest rates.

Liquidity Preference Refers Directly to Keynes' Theory Concerning