Which type of demand for money causes the demand for money curve to slope downward?
A) Speculative demand.
B) Precautionary demand.
C) Transactions demand.
D) Foreign-exchange demand.

Question

Quizplus · Accepted Answer

Speculative demand for money causes the demand for money curve to slope downward. This is because when people hold money for speculative purposes, they expect interest rates to fall in the future, and so they prefer to hold more money now to take advantage of the expected price increase of bonds and other financial instruments at that point. Therefore, the demand for money decreases as interest rates increase, causing the curve to slope downward.

Which Type of Demand for Money Causes the Demand for Money