Question

What are the motives of demand for money?

Answer 1

1. Transaction motive:
   It relates to the desire of the people to hold cash for the current transactions.
   Mt=f (y)

    

2. Precautionary motive:
   It relates to the desire of the people to hold cash to meet unexpected or unforeseen expenditures.
   Mp = f (y)

3. Speculative motive:
   It relates to the desire of the people to hold cash in order to take advantage of market movements regarding future changes in the price of bonds and securities in the capital market.
   Ms = f (i)