Time-Preference Theory Of Interest
- Time-Preference Theory Of Interest
- A theory that examines the nature of consumerism, and the factors that influence consumers to delay current consumption or expenditures in anticipation of greater future returns. The rate of time preference itself can be quantified as the amount of money required to compensate the consumer for foregoing current consumption. This theory also attempts to tie interest rates into the equation by comparing the perceived value of expected future returns with the rate of interest paid on current savings.
This theory was initially constructed in 1871 by Carl Menger, an Austrian economist. This theory also stipulates that the consumer's rate of time preference, and therefore the interest required, will probably rise as the consumer's savings increase. This means that the consumer is likely to restrict his or her savings to a level at which the rate of time preference equals the rate of interest paid on savings.
Investment dictionary.
Academic.
2012.
Look at other dictionaries:
Time preference — In economics, time preference (or discounting ) pertains to how large a premium a consumer will place on enjoyment nearer in time over more remote enjoyment.There is no absolute distinction that separates high and low time preference, only… … Wikipedia
Preference — (also called taste or penchant ) is a concept, used in the social sciences, particularly economics. It assumes a real or imagined choice between alternatives and the possibility of rank ordering of these alternatives, based on happiness,… … Wikipedia
interest — /in teuhr ist, trist/, n. 1. the feeling of a person whose attention, concern, or curiosity is particularly engaged by something: She has a great interest in the poetry of Donne. 2. something that concerns, involves, draws the attention of, or… … Universalium
Interest rate — Finance Financial markets Bond market … Wikipedia
Interest — For other uses, see Interest (disambiguation). Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money,[1] or money earned… … Wikipedia
Time value of money — The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. The time value of money is the central concept in finance theory. For example, $100 of today s money invested for one year… … Wikipedia
capital and interest — ▪ economics Introduction in economics, a stock of resources that may be employed in the production of goods and services and the price paid for the use of credit or money, respectively. Capital in economics is a word of many meanings … Universalium
Austrian Business Cycle Theory — The Austrian business cycle theory is the Austrian School s explanation of the phenomenon of business cycles (or credit cycles ). Austrian economists assert that inherently damaging and ineffective central bank policies are the predominant cause… … Wikipedia
Rational choice theory — This article is about a theory of economics. For Rational Choice Theory as applied to criminology, see Rational choice theory (criminology). Economics … Wikipedia
The Theory of Interstellar Trade — [ [http://www.princeton.edu/ pkrugman/interstellar.pdf The Theory of Interstellar Trade ] ] is a paper written in 1978 by economist Paul Krugman. He described the paper as something he wrote to cheer himself up when he was an oppressed assistant… … Wikipedia
