Answer to Question #129629 in Macroeconomics for KGOTHATSO

Question

Give your own detailed explanation of liquidity preference theory and how the
demand for money curve is determined

Answer 1

The interest rate that adjusts the difference between money supply and money demand is called the theory of Keynes's theory. The theory itself tries to show and explain how the down slope of the aggregate demand curve.

It touches on, firstly on how large amount of prices increases money demand. Secondly on how increased money demand leads to increased rate of interest. Thirdly on how increased interest rate the quantity of goods Ans service demanded. Finally results from this analysis represents a negative relationship between the price level and the quantity of goods and services demanded.