The theory of liquidity preference assumes that the nominal supply of money is determined by the
A)level of real output only.
B)interest rate only.
C)level of real output and by the interest rate.
D)Federal Reserve.

Question

Quizplus · Accepted Answer

The theory of liquidity preference, proposed by John Maynard Keynes, assumes that the nominal supply of money is determined by the central bank, such as the Federal Reserve in the United States.

The Theory of Liquidity Preference Assumes That the Nominal Supply