According to liquidity-preference theory, other things being equal, what does a higher price level lead households to do in the short run?
A) increase residential investment
B) decrease the amount of cash they want to hold
C) buy bonds
D) decrease consumption

Question

Quizplus · Accepted Answer

A higher price level increases the demand for money, leading households to hold more cash and reduce consumption to maintain their liquidity preference.

According to Liquidity-Preference Theory, Other Things Being Equal, What Does