Tobin's model of the speculative demand for money improves on Keynes's analysis by showing that
A)the speculative demand for money is interest insensitive.
B)the transactions demand for money is interest insensitive.
C)people will hold a diversified portfolio.
D)people will hold money or bonds but not both.

Question

Quizplus · Accepted Answer

Tobin's model introduces the idea of portfolio diversification, suggesting that individuals will hold a mix of assets (including money and bonds) to balance risk and return, rather than exclusively choosing one over the other as implied in Keynes's simpler model. This diversification reflects a more nuanced understanding of speculative demand for money.

Tobin's Model of the Speculative Demand for Money Improves on Keynes's