ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The supply and demand for loanable funds
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The supply and demand for money
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The supply and demand for labor
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Aggregate supply and aggregate demand.
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Detailed explanation-1: -According to Keynes, the rate of interest is determined by the demand for money and the supply of money. OM is the total amount of money supplied by the central bank. At point E, demand for money becomes equal to the supply of money.
Detailed explanation-2: -What Is Liquidity Preference Theory? Liquidity Preference Theory is a model that suggests that an investor should demand a higher interest rate or premium on securities with long-term maturities that carry greater risk because, all other factors being equal, investors prefer cash or other highly liquid holdings.
Detailed explanation-3: -The Keynesian theory of interest rate refers to the market interest rate, i.e. the rate „governing the terms on which funds are being currently supplied‟ (Keynes, 1960, p. 165)1. efficiency of capital, maintained at a level equal to the monetary rate of interest.