The quantity of money held in response to interest rates is the:
A) transactions motive for holding money.
B) precautionary motive for holding money.
C) speculative motive for holding money.
D) unit-of-account motive for holding money.

Question

Quizplus · Accepted Answer

The speculative motive for holding money refers to the desire to hold money in anticipation of a change in asset prices, including interest rates. Therefore, the quantity of money held in response to interest rates is under the speculative motive for holding money. The transactions motive refers to the need for money to make purchases, while the precautionary motive refers to holding money as a hedge against uncertain future expenses. The unit-of-account motive refers to using money as a standard of measurement for prices and values.

The Quantity of Money Held in Response to Interest Rates