According to liquidity preference theory,a decrease in the price level causes the interest rate to
A)increase,which increases the quantity of goods and services demanded.
B)increase,which decreases the quantity of goods and services demanded.
C)decrease,which increases the quantity of goods and services demanded.
D)decrease,which decreases the quantity of goods and services demanded.

Question

Quizplus · Accepted Answer

According to liquidity preference theory, a decrease in the price level reduces the demand for money, leading to a lower interest rate. This lower interest rate encourages more borrowing and spending, thereby increasing the quantity of goods and services demanded.

According to Liquidity Preference Theory,a Decrease in the Price Level