In the Keynesian theory of the demand for money, the transaction demand for money is primarily determined by ________ and the speculative demand by ________.

Question

Quizplus · Accepted Answer

In the Keynesian theory of the demand for money, the transaction demand for money is primarily determined by the medium of exchange function and income, as individuals need money for day-to-day transactions. The speculative demand for money, on the other hand, is primarily determined by the store of value function and interest rates, as individuals may hold money instead of other assets if they expect interest rates to increase in the future. Choice A is incorrect as it incorrectly states that income affects the speculative demand for money, which is primarily determined by interest rates. Choice B is incorrect as it incorrectly states that interest rates affect the transaction demand for money, which is primarily determined by the medium of exchange function and income. Choice D is incorrect as it incorrectly states that interest rate affects the store of value function, which is primarily determined by the expected yield on other assets.

In the Keynesian Theory of the Demand for Money, the Transaction