Liquidity-preference theory
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Liquidity-preference theory is a simple model of the interest rate, based on the ideas in Keynes's General Theory, which says that the interest rate adjusts to equilibrate the supply and demand for real money balances.
Definition
According to Macroeconomics by Mankiw (7th edition),
- Liquidity-preference theory. A simple model of the interest rate, based on the ideas in Keynes's General Theory, which says that the interest rate adjusts to equilibrate the supply and demand for real money balances.
