Question

According to liquidity preference theory, the money-supply curve would shift rightward a. if the Federal Reserve chose to increase the money supply. b. if the interest rate increased. c. if the money demand curve shifted right. d. if the price level increased.

Answer 1

According to liquidity preference theory, there is a rightward shift in the money supply curve when the federal reserve decides to raise the money supply.

Option A is the correct answer.

What is a federal reserve?

The federal reserve is the central banking authority in America which was established in the year 1913 under the Federal Reserve Act.

When the federal reserves increase the money supply then the money supply curve moves in the right direction and when the federal reserve decreases the money supply then the money supply moves toward the left. This shows a direct relationship between the federal reserve and the money supply curve.

Therefore, there is a rise in money supply by the Federal reserve causing the money supply curve to shift in the right direction.

Learn more about the rise in money supply in the related link:

brainly.com/question/26000265

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