The liquidity preference theory, also known as the liquidity theory of interest, is a popular concept in economics that explains how individuals and companies determine their preference for holding liquid assets. There are several synonyms for the phrase liquidity preference theory, including the cash preference theory and the preference for liquidity theory. Another related term is the monetary theory of interest, which focuses on the relationship between the supply of money and the demand for credit in determining interest rates. Regardless of the terminology used, the basic idea behind the liquidity preference theory is that individuals and businesses generally prefer to hold liquid assets, such as cash, rather than illiquid assets, such as investments or property.