the economics of money, banking, and financial markets

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21.3 Keynes's Liquidity Preference Theory

1. 
   

   The Keynesian theory of money demand emphasizes the importance of ____.
   A) a constant velocity
   B) irrational behavior on the part of some economic agents
   C) interest rates on the demand for money
   D) expectations
   Answer: C
   Diff: 2 Type: MC Page Ref: 533
   Skill: Recall
   Objective List: 21.2 Define the theories of the demand for money

   
   


2. 
   

   Keynes hypothesized that the transactions component of money demand was primarily
   determined by the level of ____.
   A) interest rates
   B) velocity
   C) income
   D) stock market prices
   Answer: C
   Diff: 2 Type: MC Page Ref: 533
   Skill: Recall
   Objective List: 21.2 Define the theories of the demand for money

   
   


3. 
   

   Keynes argued that the transactions component of the demand for money was primarily
   determined by the level of people's ____, which he believed were proportional to ____.
   A) transactions; income
   B) transactions; age
   C) incomes; wealth
   D) incomes; age
   Answer: A
   Diff: 2 Type: MC Page Ref: 533
   Skill: Recall
   Objective List: 21.2 Define the theories of the demand for money

   
   


4. 
   

   Keynes hypothesized that the precautionary component of money demand was primarily
   determined by the level of ____.
   A) interest rates
   B) velocity
   C) income
   D) stock market prices
   Answer: C
   Diff: 2 Type: MC Page Ref: 533
   Skill: Recall
   Objective List: 21.2 Define the theories of the demand for money