Question 7 Keynes, in Chapter 13 of "The General Theory of Employment interest and Money" (p.83) elaborates on the rate of interest at any time, being the reward for parting with liquidity, and thus a measure of the unwillingness of those who possess money to part with their liquid control over it Keynes then continues to describe the three components that may makeup a firm's (or individual's) liquidity preference. Use Keyne's three components of liquidity preference to describe the phenomenon of liquidity Premium Theory as presented on page 173 of your book