The notion of liquidity preference provides another way of conceptualizing the demand for money. However, the term money is a broader concept than liquidity. Money is a temporary abode of value,1 and it can also be defined as anything that is acceptable in exchange for a good or service. For more detail on definitions of money and its different types refer to Naghshpour.2 The distinction among the types of money is based on the ease of converting it to cash, or its liquidity. Therefore, the concept of liquidity preference is concerned with the demand for cash balances, or more precisely, the question of why people hold cash when other forms of money, such as a certificates of deposit, or assets, such as stocks ...
Get Fiscal Policy within the IS-LM Framework now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
