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

Question

Quizplus · Accepted Answer

A higher price level reduces the real value of money holdings, leading households to decrease consumption in the short run to maintain their purchasing power.

According to Liquidity-Preference Theory,other Things Being Equal,a Higher Price Level