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According to the liquidity preference theory, interest rates are determined by:
  • a)
    The rate of inflation
  • b)
    The level of investment
  • c)
    The supply of money
  • d)
    The demand for money
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
According to the liquidity preference theory, interest rates are deter...
The liquidity preference theory, proposed by John Maynard Keynes, suggests that interest rates are determined by the demand for and supply of money. When the demand for money exceeds its supply, interest rates tend to rise, and vice versa.
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According to the liquidity preference theory, interest rates are determined by:a)The rate of inflationb)The level of investmentc)The supply of moneyd)The demand for moneyCorrect answer is option 'D'. Can you explain this answer?
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