Brief Principles of Macroeconomics...
Brief Principles of Macroeconomics...
What is the theory of liquidity preference? How does it help explain the downward slope of the aggregate-demand curve?
Liquidity preference theory and downward sloping of aggregate demand.
Keynes in his classic book “The General Theory of Employment, Interest, and Money”, proposed the theory of liquidity preference, according to which, the interest rate adjusts to bring money supply and money demanded into balance. In other words, it is the theory of how the interest rate is determined.
According to the theory, the aggregate–demand curve slopes downward be...
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