According to Keynes, the relationship between money supply and rate of interest is:
Correct answer: A. Negative
- A. Negative
- B. Positive
- C. Direct
- D. None of theseTake Economics Courses
Explanation
In Keynesian liquidity-preference theory, a larger money supply lowers the interest rate when other factors remain constant. Thus, the relationship between money supply and interest rate is negative.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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