Keynes' Theory of the Interest Rate: A Critical Approach

Katarzyna Appelt

Abstract

John M. Keynes – the author of General Theory of Employment, Interest and Money – assumed that the interest rate is the price which brings into equilibrium the desire to hold wealth in cash with the supply of cash resources, and the reward for parting with liquidity at the same time. He indicated liquidity preference as the key element of the theory of the demand for money, whereas the supply of money is a discretionary factor, i.e. depending on the policy pursued by monetary authorities. It has been proven that such an approach comes with at least three errors: inconsistency in defining the rate of interest, vicious circle in arguing and departure from the economics of value for functional adequacies.
Author Katarzyna Appelt (WGM / KFM)
Katarzyna Appelt,,
- Department of International Finance
Journal seriesTheory, Methodology, Practice, ISSN 1589-3413, e-ISSN 2415-9883, (0 pkt)
Issue year2016
Vol12
No1
Pages3-8
Publication size in sheets0.5
Keywords in EnglishKeynes, liquidity preference, interest rate, classical school
DOIDOI:10.18096/TMP.2016.01.01
URL http://real.mtak.hu/37796/1/01.pdf
Languageen angielski
Score (nominal)5
ScoreMinisterial score = 0.0, ArticleFromJournal
Ministerial score (2013-2016) = 5.0, ArticleFromJournal - czasopismo zagraniczne spoza list
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