Keynes' Theory of the Interest Rate: A Critical Approach


  • Katarzyna Appelt Poznan University of Economics and Business



interest rate, liquidity preference, demand for money, classical school, Keynes


John M. Keynes – the author of General Theory of Employment, Interest and Money – assumed that the interest rate is the price which brings into equilibrium the desire to hold wealth in cash with the supply of cash resources, and the reward for parting with liquidity at the same time. He indicated liquidity preference as the key element of the theory of the demand for money, whereas the supply of money is a discretionary factor, i.e. depending on the policy pursued by monetary authorities. It has been proven that such an approach comes with at least three errors: inconsistency in defining the rate of interest, vicious circle in arguing and departure from the economics of value for functional adequacies.

Author Biography

Katarzyna Appelt, Poznan University of Economics and Business

Assistant Professor


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How to Cite

Appelt, K. . (2016). Keynes’ Theory of the Interest Rate: A Critical Approach. Theory, Methodology, Practice - Review of Business and Management, 12(01), 3–8.