According to the theory of liquidity preference, the supply of nominal money balances:
A) is chosen by the central bank.
B) depends on the interest rate.
C) varies with the price level.
D) changes as the level of income changes.

Question

Quizplus · Accepted Answer

The theory of liquidity preference, developed by John Maynard Keynes, suggests that the supply of nominal money balances is determined by the central bank, as it controls the monetary base through its monetary policy operations.

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