According to liquidity preference theory,the money supply curve would shift right
A)if the money demand curve shifted right.
B)if the Federal Reserve chose to increase money supply.
C)if the interest rate increased.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

According to liquidity preference theory, if the Federal Reserve chooses to increase the money supply, the money supply curve will shift right. The other options are incorrect: if the money demand curve shifts right, it would lead to an increase in the interest rate, not the money supply curve; and if the interest rate increases, it would lead to a decrease in the money supply curve, not a rightward shift.

According to Liquidity Preference Theory,the Money Supply Curve Would Shift