Customize - Urban Dictionary Store

Pro Customization

Create unique products with your own words and definitions

Preview

Personalize Your Design

Your Word

Your Definition

*noun*; the tendency for the public to want to hold income in cash relative to its willingness to hold it as interest-bearing savings (bonds).

The liquidity [preference] is analogous to a supply curve for lendable funds.  If the price for lendable funds--that is to say, the interest rate--is high, then the amount be be large.  If the interest rate is low, then the public will be more inclined to hoard income as cash.

Income held as cash is not spent on goods and services, so if the amount increases abruptly then there will be a recession.  If it is held in some interest-bearing form, then it can be spent on fixed capital, thereby [increasing] output and employment.

During a recession, if the liquidity [preference] is high, a lot of money is going to be held as cash.  One could free up some cash for job-creating investment by raising interest rates, but that would eradicate  a lot of business opportunities.  So monetary [authorities] monetize debt instead, creating a new supply of credit to replace the savings lost by falling interest rates.

Text fits

Menu

Pro Customization

Preview

Personalize Your Design

Shopping Assistant