The liquidity preference theory suggests that long-term interest rates tend to be higher than short-term rates (and therefore the yield curve slopes up)due to the lower liquidity and higher responsiveness to general interest rate movements of longer-term securities.

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This statement is true according to the liquidity preference theory, which was developed by John Maynard Keynes. The theory suggests that investors prefer more liquid short-term securities, leading to higher demand and lower yields, while longer-term securities are less liquid and more sensitive to interest rate movements, leading to higher yields. This results in an upward-sloping yield curve.

The Liquidity Preference Theory Suggests That Long-Term Interest Rates Tend