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- Liquidity_preference abstract "In macroeconomic theory, liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money. The demand for money as an asset was theorized to depend on the interest foregone by not holding bonds (here, the term "bonds" can be understood to also represent stocks and other less liquid assets in general, as well as government bonds). Interest rates, he argues, cannot be a reward for saving as such because, if a person hoards his savings in cash, keeping it under his mattress say, he will receive no interest, although he has nevertheless refrained from consuming all his current income. Instead of a reward for saving, interest, in the Keynesian analysis, is a reward for parting with liquidity.According to Keynes, demand for liquidity is determined by three motives: the transactions motive: people prefer to have liquidity to assure basic transactions, for their income is not constantly available. The amount of liquidity demanded is determined by the level of income: the higher the income, the more money demanded for carrying out increased spending. the precautionary motive: people prefer to have liquidity in the case of social unexpected problems that need unusual costs. The amount of money demanded for this purpose increases as income increases. speculative motive: people retain liquidity to speculate that bond prices will fall. When the interest rate decreases people demand more money to hold until the interest rate increases, which would drive down the price of an existing bond to keep its yield in line with the interest rate. Thus, the lower the interest rate, the more money demanded (and vice versa).The liquidity-preference relation can be represented graphically as a schedule of the money demanded at each different interest rate. The supply of money together with the liquidity-preference curve in theory interact to determine the interest rate at which the quantity of money demanded equals the quantity of money supplied (see IS/LM model).".
- Liquidity_preference wikiPageExternalLink QT7.html.
- Liquidity_preference wikiPageExternalLink sample_article.
- Liquidity_preference wikiPageID "3059780".
- Liquidity_preference wikiPageRevisionID "599260535".
- Liquidity_preference hasPhotoCollection Liquidity_preference.
- Liquidity_preference subject Category:John_Maynard_Keynes.
- Liquidity_preference subject Category:Keynesian_economics.
- Liquidity_preference subject Category:Macroeconomics.
- Liquidity_preference subject Category:Monetary_economics.
- Liquidity_preference subject Category:Monetary_policy.
- Liquidity_preference subject Category:Money.
- Liquidity_preference comment "In macroeconomic theory, liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money.".
- Liquidity_preference label "Liquiditeitsvoorkeur".
- Liquidity_preference label "Liquidity preference".
- Liquidity_preference label "Liquiditätsprämie".
- Liquidity_preference label "Preferencia por la liquidez".
- Liquidity_preference label "Preferenza per la liquidità".
- Liquidity_preference label "Предпочтение ликвидности".
- Liquidity_preference sameAs Liquiditätsprämie.
- Liquidity_preference sameAs Preferencia_por_la_liquidez.
- Liquidity_preference sameAs Théorie_de_la_préférence_pour_la_liquidité.
- Liquidity_preference sameAs Preferenza_per_la_liquidità.
- Liquidity_preference sameAs Liquiditeitsvoorkeur.
- Liquidity_preference sameAs m.08nt76.
- Liquidity_preference sameAs Q585303.
- Liquidity_preference sameAs Q585303.
- Liquidity_preference wasDerivedFrom Liquidity_preference?oldid=599260535.
- Liquidity_preference isPrimaryTopicOf Liquidity_preference.