By factoring in the value of holding cash, the Cambridge economists took significant steps toward the concept of liquidity preference that Keynes would later develop.
12.
In his " General Theory of Employment, Interest and Money ", Keynes expanded on this concept to develop the idea of liquidity preference, a central Keynesian concept.
13.
He explained the relationship via changing liquidity preferences : people increase their money holdings during times of economic difficulty by reducing their spending, which further slows the economy.
14.
John Maynard Keynes renamed the concept of " basic interest " articulated in Gesell's book " The Natural Economic Order " with the more familiar term liquidity preference.
15.
Further, exogenous decreases in liquidity preference, perhaps due to improved transactions technologies, lead to downward shifts of the LM curve and thus increases in income and decreases in interest rates.
16.
The goods market is represented by the equilibrium in investment and saving ( IS ), and the money market is represented by the equilibrium between the money supply and liquidity preference.
17.
In Keynes's theory, the quantity theory broke down because people and businesses tend to hold on to their cash in tough economic times a phenomenon he described in terms of liquidity preferences.
18.
Friedman's 1956 " The Quantity Theory of Money : A Restatement " } } incorporated Keynes's demand for money and liquidity preference into an equation similar to the classical equation of exchange.
19.
In outlining this Shackle sought to marry what he considered Keynes'best insights in the " Treatise on Money " with his later notion of liquidity preference in the " General Theory ".
20.
The debt deflation theory was familiar to John Maynard Keynes prior to Fisher's discussion of it, but he found it lacking in comparison to what would become his theory of liquidity preference.
