Liquidity preference theory

Reference no: EM13691764

Use the Keynesian model of "Liquidity Preference Theory" to predict how each of the followingshocks would likely affect a nation's overall level of interest rates in the short run, all else equal.In each case, be sure to (1) clearly state the predicted direction of change for interest rates, (2)depict the impact of the shock with a supply/demand diagram, and (3) explain your predictionsintuitively in words.a.An economic downturn causes real aggregate income to fall b.The central bank reduces the size of the money supply c.An energy price shock increases the overall level of prices for goods and services

Reference no: EM13691764

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