Liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by Keynes to explain determination of the interest rate by the supply and demand for money. The marginal efficiency of capital displays the expected rate of return from investment, at a particular given time. The marginal efficiency of capital is compared to the rate of interest. If the marginal efficiency of capital was lower than the interest rate, the firm would be better off not investing, but saving the money.
LIQUIDITY PREFERENCE AND MARGINAL EFFICIENCY
Prabhu TL is a SenseCentral contributor covering digital products, entrepreneurship, and scalable online business systems. He focuses on turning ideas into repeatable processes—validation, positioning, marketing, and execution. His writing is known for simple frameworks, clear checklists, and real-world examples. When he’s not writing, he’s usually building new digital assets and experimenting with growth channels.
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