According to liquidity preference theory,an increase in the price level shifts the
A)money demand curve right so the interest rate increases.
B)money demand curve right so the interest rate decreases.
C)money demand curve left so the interest rate decreases.
D)money demand curve left so the interest rate increases.

Question

Quizplus · Accepted Answer

Liquidity preference theory suggests that an increase in the price level leads to an increase in the demand for money, shifting the money demand curve to the right. This shift results in an increase in the interest rate.

According to Liquidity Preference Theory,an Increase in the Price Level