*noun*; the tendency for the public to want to hold income in cash relative to its willingness to hold it as interest-bearing savings (bonds).
The liquidity preference is analogous to a supply curve for lendable funds. If the price for lendable funds--that is to say, the interest rate--is high, then the amount be be large. If the interest rate is low, then the public will be more inclined to hoard income as cash.
Income held as cash is not spent on goods and services, so if the amount increases abruptly then there will be a recession. If it is held in some interest-bearing form, then it can be spent on fixed capital, thereby increasing output and employment.
During a recession, if the liquidity preference is high, a lot of money is going to be held as cash. One could free up some cash for job-creating investment by raising interest rates, but that would eradicate a lot of business opportunities. So monetary authorities monetize debt instead, creating a new supply of credit to replace the savings lost by falling interest rates.
The liquidity preference is analogous to a supply curve for lendable funds. If the price for lendable funds--that is to say, the interest rate--is high, then the amount be be large. If the interest rate is low, then the public will be more inclined to hoard income as cash.
Income held as cash is not spent on goods and services, so if the amount increases abruptly then there will be a recession. If it is held in some interest-bearing form, then it can be spent on fixed capital, thereby increasing output and employment.
During a recession, if the liquidity preference is high, a lot of money is going to be held as cash. One could free up some cash for job-creating investment by raising interest rates, but that would eradicate a lot of business opportunities. So monetary authorities monetize debt instead, creating a new supply of credit to replace the savings lost by falling interest rates.
...An individual’s liquidity preference is given by a schedule of the amounts of his resources, valued in terms of money or of wage-units, which he will wish to retain in the form of money....
John M. Keynes, *General Theory of Employment, Interest, and Money* (1936), Ch.13
John M. Keynes, *General Theory of Employment, Interest, and Money* (1936), Ch.13
by Abu Yahya March 04, 2009
by Darren July 21, 2004
Jagermeister and goldschlager. A drink so potent when buying both togeather the sales clerk asked if i was trying to kill myself.
Liquid Cocaine, the cure for everything.
by dmonney August 11, 2005
LSD found in liquid form. The liquid is contained in a vile and is dropped under the toungue or in the eyes.
by Reed December 09, 2006
the act of excreating a creamy liquid from the penis while one is asleep. alse known as a wet dream. this happens when one goest to sleep and has a dream concerning sex or sexualy related topics and gets sexually arroused and jizzes in ones sleep
by the cheat February 20, 2003
by jerryblank May 16, 2005
A nickname for Alcoholic drinks. It is so named because alcoholic drinks seem to have a fortitude-enhancing effect, allowing you to talk to people you wouldn't otherwise talk to, and not care about things you ordinarily would.
When my ex invited her boyfriend to live with us, I was distraught. However, after a few doses of liquid courage, I could not have cared less.
by lotusimperium November 01, 2010