Interest and the keynesian liquidity preference theory, Managerial Economics

Interest and the Keynesian Liquidity Preference Theory

Interest is a factor income in that it is considered to be payment to or return on capital in the sense that it is payment to those who provide loanable funds, which are used for the purchase of capital assets.  The payment of interest to the providers of loanable funds may be justified on the following grounds:

  1. The lender postpones present consumption and enjoyment and interest is paid as persuasion for him/her to make this sacrifice.
  2. There is risk of default in that the borrower may fail to pay back and interest is paid as persuasion for the lender to undertake this risk.
  3. There is loss of purchasing power due to increases in prices over time, and interest is paid as compensation for this loss.
  4. The borrower earns income from the investment, and the tender can justifiably claim a share in that income.
Posted Date: 11/29/2012 5:00:34 AM | Location : United States







Related Discussions:- Interest and the keynesian liquidity preference theory, Assignment Help, Ask Question on Interest and the keynesian liquidity preference theory, Get Answer, Expert's Help, Interest and the keynesian liquidity preference theory Discussions

Write discussion on Interest and the keynesian liquidity preference theory
Your posts are moderated
Related Questions
demand function is q=4850 - 5p(1) + 1.5p(2) + 0.1 Y WHEN Y=10000 p(1)=200 p(2)= 100 find income elasticity of demand for p(1)


Importance of Cross Elasticity Knowledge of cross elasticity is necessary when the government wants to impose a tariff on an imported commodity to protect a domestic industry.

Jeremy is an economics learner who loves hamburgers. He could eat any number of them for dinner, but he gets a really bad stomach ache after eating a certain amount. In fact, his u

Q. Explain about Utility analysis? A subset of consumer demand theory which analysis consumer behaviour and market demand employing marginal utility and total utility. Key prin

Question 1. Discuss the practical application of Price elasticity and Income elasticity of demand Question 2. Discuss profit maximizing model in detail Question 3. Descr

Average Revenue (AR) This is the revenue per unit of the commodity sold.  It is obtained by dividing Total Revenue by total quantity sold.  For a firm in a perfectly competiti

Marginal utility approach The downward sloping nature of the demand curve can be explained by using the law of diminishing marginal utility .  For instance, consider a consum

define scarcity and opportunity cost.Show how these concept are useful in managerial decision making

NATIONAL INCOME AND STANDARDS OF LIVING Standard of living refers to the quantity of goods and services enjoyed by a person. These goods may be provided publicly, such as in t