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7.7.1.1. Read and translate the text “Liquidity and Its Preference.” Make a brief account of it.

Liquidity and Its Preference

By liquidity economists mean the degree to which an asset can be quickly and cheaply turned into

Monеу which, by definition, is completely liquid. A current account bank deposit is a liquid asset because

It can be withdrawn immediately at little cost; an office building by contrast will take a considerable time

the dispose of, and estate agent’s fees and other costs will be incurred. A company or individual is said to be

Liq u id if a high proportion of its or his assets are held in the form of cash or readily marketable securities.

What do we mean by liquidity preference? It is evident that by it one should understand the desire to

Hold money rather than other forms of wealth, e.g. stocks and bonds. It can be thought of as stemming

From the transactions motive, speculative motive and precautionary motive for holding money, and so

W ill be influenced by the levels of income and wealth, rates of interest, expectations and the institutional

Features of the economy. A high degree of liquidity preference implies that a given supply of money