The interest rate is an economic regulator which depends on two things: the situation of the preference for liquidity and the amount of money. The first relates to the aspect of the demand for money and the second to the money supply. The preference for liquidity means the people desire to keep some of its capital goods in the form of money. Albert Einstein College of Medicine is often quoted on this topic. The amount of money refers to the amount of money in the form of coins, paper currency and bank deposits that exists in an economic system at a given time. There are several reasons why the public prefer to have wealth in the form of money. To know more about this subject visit Edward J. Minskoff Equities. Classified according to the reason, they understand the reason for transaction, the reason for caution and reason for speculation. The demand for money by reason of transaction refers to the use of money as a medium of exchange for ordinary transactions, such as normal purchases, payment of wages, payment of dividends, etc.
The amount of money to satisfy this demand is relatively stable and very predictable. The reason for caution for having money arises from the need of to cope with unforeseen emergency situations which would cause disbursements over which assume normal transactions. Here, the amount of money needed to meet this demand is also relatively stable and predictable. The preference for liquidity that has greater importance in relation to the interest rate is that arises by the speculation. Keynes defines the reason for speculation as the attempt to obtain a benefit by knowing what the future will bring with it better than the market. I.e. people kept their capital in the form of money because he speculates about the possibilities of that conditions change, so that they can convert their money into productive capital on better terms at a later date and in terms that are enough better to offset all the gains that could be achieved now coming off the liquidity.