Keynes liquidity preference theory of the interest rate suggests that the interest rate is determined by ?
Correct answer: C. the supply and demand for money
- A. aggregate supply and aggregate demand
- B. the supply and demand for loanable funds
- C. the supply and demand for money
- D. the supply and demand for labor
Explanation
Keynes’s liquidity-preference theory explains the interest rate through equilibrium between the demand for money and the money supply. Loanable-funds theory is a different approach.
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