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
The Frugal Economy In the Frugal economy, households and firms look to the future, and as a result undertake both Saving and Investment. SAVING Saving is income no

When Burton Cummings graduated with honors from the Canadian Trucking Academy, his father gave him a $350,000 tractor-trailer rig. Recently, Burton was boasting to some fellow truc

Define Managerial economics according to McNair and Meriam McNair and Meriam:  "Managerial economics comprises the use of economic modes of thought to analyse business situatio

Determine the Application of managerial economics Application of managerial economics isn't restricted to profit-seeking business organisations. Tools of managerial economics

Q. What is Production and Cost Function? Production functions and cost functions are the keystones of managerial and business economics. A production function is a mathematical

Harrod Domar Theory A basic principle that has been stressed by both Harrod and Domar in their growth models and which has been incorporated in all modern growth theories is th

Consider an economy with two individuals. Individual 1 has (inverse) demand curve for a public good given by P1=60-2Q1, While individual 2 has (inverse) demand curve for the public

Consider an economy with three assets and three states. Let be the matrix of asset payoffs at t=1 and p the vector of asset prices at t=0. Assume p 3 =2.  a) Does an ar

Enumerate the Scope of managerial economics The scope of managerial economics contains following subjects:  1. The Theory of demand 2. The Theory of production 3. The

briefly explain oppurtunity cost in decision making?