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In economics, the premium that holders of wealth demand for exchanging ready money or bank deposits for safe, nonliquid assets such as government bonds. As first used by John Maynard Keynes, liquidity preference referred to the demand for money as an asset. He hypothesized that the amount of money held for this purpose would vary inversely with the rate of interest. Post-Keynesian analysis of liquidity preference has identified other factors that influence the demand for money, including income levels and the yields of various forms of wealth.
This entry comes from Encyclopædia Britannica Concise. For the full entry on liquidity preference, visit Britannica.com.
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