The liquidity preference theory ________.
A)distinguishes between nominal and real quantities
B)shows that demand for real balances depends on real income
C)shows that demand for real balances depends on the nominal interest rate
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The liquidity preference theory, as proposed by John Maynard Keynes, indeed distinguishes between nominal and real quantities, shows that the demand for real balances depends on real income, and also shows that the demand for real balances depends on the nominal interest rate.

The Liquidity Preference Theory ________