The speculative demand for money

Question

Quizplus · Accepted Answer

The speculative demand for money refers to the demand for money that is held for the purpose of making future investments or speculative transactions. This demand for money is typically sensitive to changes in interest rates. When interest rates decrease below normal levels, individuals may see the potential for higher returns on investment activities such as stocks, bonds, and real estate, and therefore may choose to reduce their holdings of money in favor of these investments. As a result, the speculative demand for money decreases. Therefore, option C stating that the speculative demand for money increases when interest rates decrease below normal is incorrect.

The Speculative Demand for Money