Interest and the keynesian liquidity preference theory, Managerial Economics

Assignment Help:

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.

Related Discussions:- Interest and the keynesian liquidity preference theory

Merits of direct taxes, Merits of direct taxes a.  They satisfy the pr...

Merits of direct taxes a.  They satisfy the principle of equity as they are easily matched to the tax payers capacity to pay once assessed. b.  They satisfy the principles

Example on changes in fixed costs and profit maximisation, Q. Example on Ch...

Q. Example on Changes in fixed costs and profit maximisation? What if arena owner in the illustration above triples the fee for the subsequent concert but all other factors are

Explain about time series analysis, Q. Explain about Time series analysis? ...

Q. Explain about Time series analysis? An analysis of relationship between variables over a period of time. Time-series analysis is helpful in assessing how an economic or othe

Individual and market demand schedule, Individual and market demand schedul...

Individual and market demand schedule The plan of the possible quantities that will be demanded at different prices by an individual is called Individual demand schedule. Su

Explain about cardinal utility, Q. Explain about Cardinal utility? A me...

Q. Explain about Cardinal utility? A measure of utility or satisfaction derived from consumption of services and goods which can be measured using an absolute scale. Cardinal u

Short-run and long-run, 1. Explain the industry and describe the general pa...

1. Explain the industry and describe the general pattern of change of the particular market model. 2. Hypothesize the basic short-run and long-run behaviours of the model in the

The spendthrift economy, The Spendthrift Economy This assumes a circul...

The Spendthrift Economy This assumes a circular flow of income in a closed economy with no Government sector and no foreign trade.   It also assumes the existence of two sect

Theory of multiplier, income generation process through investment multipli...

income generation process through investment multiplier

Nash equilibria of this game, Two competing firms are each planning to intr...

Two competing firms are each planning to introduce a new product. Firm 1 will decide whether to produce product A, product B or product C, while firm 2 can choose between products

Explain about isocost line, Q. Explain about isocost line? In economics...

Q. Explain about isocost line? In economics, an isocost line signifies all combinations of inputs that cost the same total amount. Though, similar to the budget constraint in c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd