According to liquidity-preference theory, what is the shape of the money-supply curve?
A) upward sloping
B) downward sloping
C) vertical
D) horizontal

Name: According to liquidity-preference theory, what is the shape of the money-supply curve? A) upward sloping B) downward sloping C) vertical D) horizontal
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Question

Quizplus · Accepted Answer

The liquidity-preference theory suggests that the money supply is determined by the central bank and is independent of the interest rate, hence the money-supply curve is vertical.

According to Liquidity-Preference Theory, What Is the Shape of the Money-Supply