Liquidity Preference Theory, proposed by John Maynard Keynes, suggests that individuals prefer to hold their wealth in liquid forms, such as cash, rather than in illiquid assets. This preference arises from the desire for security and the ability to quickly access funds for transactions or emergencies. People are willing to pay a premium for liquidity, which influences interest rates in the economy. According to this theory, the demand for money is determined by three motives: the transaction motive, the precautionary motive, and the speculative motive. These motives explain why people choose to hold cash instead of investing it, impacting overall economic activity and monetary policy.