The speculative demand for money shows the relationship between money demand and :
A) income levels.
B) interest rates.
C) prices
D) investment.
E) consumption.

Question

Quizplus · Accepted Answer

Speculative demand for money is based on the expectation of future interest rates. As interest rates rise, people will want to hold more money in order to take advantage of higher rates in the future. Conversely, as interest rates fall, people will hold less money in expectation of lower future returns.

The Speculative Demand for Money Shows the Relationship Between Money