After studying this topic, you should be able to understand
- The transactions demand for money is the money demanded by the public for carrying on its various current transactions.
- The precautionary demand for money is the demand for cash by the public for contingencies, which may involve unexpected expenditures and opportunities.
- The existence of an uncertainty about the future gives rise to the speculative demand for money.
- In Keynes’ theory, the rate of interest is a monetary phenomenon determined by the equality between the demand for and supply of money.
- Given the demand for money, an increase in the supply of money leads to a decrease in the interest rate and vice versa.
- There can occur a change ...