In this article we will discuss about the Keynes’s liquidity theory of interest with its criticisms. Keynes defines the rate of interest as the reward of not hoarding but the reward for parting with liquidity for the specified period. It “is not the ‘price’ which brings into equilibrium the demand for resources to invest with […]
Keynes’s Liquidity Theory of Interest (With Criticisms)
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Natural and Market Rate of Interest
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In this article we will discuss about the natural and market rate of interest. The Wicksell Theory on Natural and Market Rate of Interest: Knut Wicksell was the first economist to discuss in detail the relation between natural interest rate and market interest rate. In his book Interest and Prices, he uses such phrases as […]
Indeterminacy of the Theories of Interest (With Diagram)
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In this article we will discuss about the indeterminacy of the theories of interest. Keynes criticised the classical theory of interest for being indeterminate because it failed to relate the rate of interest with the income level. To Hansen, “Keynes’s criticism of the classical theory applies equally to his own theory and to the loanable […]