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Liquidity preference theory

• Theory suggesting that for any given issuer, long-term interest rates tend to be higher than short-term rates due to the lower liquidity and higher responsiveness to general interest rate movements of longer-term securities; causes the yield curve to be upward-sloping.

 
 Embedded terms in definition
 Interest rate
Interest
Issuer
Liquidity
Securities
Yield curve
Yield
 
 Related Terms
 

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