In this article we will discuss about:- 1. Introduction to Keynes Liquidity Preference Theory of Interest 2. Demand for Money 3. Supply of Money 4. Determination of Rate of Interest 5. Changes in Demand for and Supply of Money 6. Significance of Liquidity Preference Theory of Interest 7. Criticisms 8. Conclusion. Introduction to Keynes Liquidity Preference Theory of Interest: Keynes, [...]
According to the modern theory, there are four determinants of the rate of interest: (a) The saving function, (b) The investment function, (c) Liquidity preference function and (d) The quantity of money. The equilibrium between these four variables together determines the rate of interest as well as the equilibrium level of income. According to Hansen, "An equilibrium condition is reached, [...]
In this article we will discuss about:- Introduction to Neo-Classical Loanable Funds Theory of Interest 2. Assumptions of Neo-Classical Loanable Funds Theory of Interest 3. Supply of Loanable Funds (LS) 4. Demand for Loanable Funds (LD) 5. Determination of Rate of Interest 6. Cumulative Process and Monetary Equilibrium 7. Improvement over Classical Theory 8. Criticisms. Introduction to Neo-Classical Loanable Funds [...]