According to the liquidity preference model,if the interest rate rises above its equilibrium value,the quantity of non-monetary interest-bearing financial assets demanded _____,and this leads to a _____ in the interest rate.

Question

Quizplus · Accepted Answer

If the interest rate rises above its equilibrium value, people will prefer to hold more non-monetary interest-bearing financial assets because they offer higher returns. This increased demand for these assets will lead to a decrease in the interest rate as the market adjusts back to equilibrium.

According to the Liquidity Preference Model,if the Interest Rate Rises