Question

Which of the following is the monetary theory of

interest?

(a) Saving-investment theory

(b) Loanable funds theory

(c) Liquidity preference theory

(d) Modern theory ​

Answer 1

Answer:

• Monetary theory posits that a change in money supply is the main driver of economic activity. The Federal Reserve (Fed) has three main levers to control the money supply: The reserve ratio, discount rate, and open market operations.

• Modern theory is the right answer

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