According to the theory of liquidity preference, the supply of real money balances:
A) decreases as the interest rate increases.
B) increases as the interest rate increases.
C) increases as income increases.
D) is fixed.

Question

Quizplus · Accepted Answer

The theory of liquidity preference, developed by John Maynard Keynes, suggests that the supply of real money balances is fixed by the central bank and does not change with interest rates or income.

According to the Theory of Liquidity Preference, the Supply of Real