Of the three motives for holding money suggested by Keynes,which did he believe to be the most sensitive to interest rates?
A) The transactions motive.
B) The precautionary motive.
C) The speculative motive.
D) The altruistic motive.

Question

Quizplus · Accepted Answer

Keynes believed that the speculative motive for holding money was the most sensitive to interest rates. The speculative motive refers to holding money in anticipation of future changes in asset prices, and therefore the return on the money held. As interest rates increase, the return on holding money decreases, making it more attractive to invest in other assets, and reducing the demand for money held for speculative purposes.

Of the Three Motives for Holding Money Suggested by Keynes,which