ABSTRACT
Completion of the Keynesian revolution requires an integrated theory of asset demand. Given rational portfolio management (e.g. by institutional investors) the transactions demand may come to be the most important element. Liquidity preference in a market with many assets essentially involves a choice amongst assets other than money. Rational individuals and firms will then minimise the cost of holding the cash they need for transactions and maximise the expected return on assets. This transactions theory involves a motive for holding money that does not attach a utility yield to cash balances. It assumes that utility is generated by consumption of goods and services that the cash balance purchases.
