Question

Changes in rate of interest do not very much affect the amount of money held for

Answer 1

Explanation:

Liquidity preference is the preference to have an equal amount j ^ of cash rather than claims against others.” -Prof. Mayers

Determination of Interest:

According to liquidity preference theory, interest is determined by the demand for and supply of money. It is determined at a point where supply of money is equal to demand for money.

Demand for Money:

To Keynes, money is not only a medium of exchange, but also a store of wealth. Now, there arises a question, why people want to hold cash?