Question

With the real money supply held constant, the theory of liquidity preference implies that a higher income level will be consistent with:________.

Answer 1

Answer:

a higher interest rate

Explanation:

In the case when there is a supply of real money and it becomes constant so here the liquidity preference theory denotes that if there is a level of the higher income so it would be consistent with the interest rate i.e. higher

The liquidity preference theory means the theory where the investor demand the rate of interest i.e. higher that has long term maturities with high risk

So as per the given situation, the higher interest rate is the answer