According to liquidity-preference theory, in which circumstance would the money-supply curve shift left?
A) if government spending decreased
B) only if the Bank of Canada chose to decrease the money supply
C) if the interest rate increased
D) if the price level increased

Question

Quizplus · Accepted Answer

The liquidity-preference theory suggests that the money-supply curve would shift left only if the central bank (in this case, the Bank of Canada) chose to decrease the money supply. This is because the central bank controls the money supply through its monetary policy actions.

According to Liquidity-Preference Theory, in Which Circumstance Would the Money-Supply