The nominal interest rate is
A)endogenous in the ATM model, while it is exogenous in the liquiditypreference model.
B)exogenous in the ATM model, while it is endogenous in the liquiditypreference model.
C)endogenous in both the liquiditypreference and ATM model.
D)exogenous in both the liquiditypreference and ATM model.

Question

​The nominal interest rate is
A)​endogenous in the ATM model, while it is exogenous in the liquidity­preference model.
B)​exogenous in the ATM model, while it is endogenous in the liquidity­preference model.
C)​endogenous in both the liquidity­preference and ATM model.
D)​exogenous in both the liquidity­preference and ATM model.

Quizplus · Accepted Answer

In the ATM (aggregate demand and supply) model, the nominal interest rate is exogenous as it is determined by the central bank policy. In contrast, in the liquidity preference model developed by Keynes, the nominal interest rate is endogenous, as it reflects the balance between the demand and supply of money in the economy.

​The Nominal Interest Rate Is

The Nominal Interest Rate Is