"DEMAND FOR MONEY" The Classical schl of thought argued tht - TopicsExpress

"DEMAND FOR MONEY" The Classical schl of thought argued tht Transactionary motive is the only motive for demand for money,But According to JM KEYNES he argued tht there ar 3 Motives , the : Transactionary Motive Precautionary Motive Speculative Motive Hence, the Transactionary Motive is the desire for holding möney to meet the planned expenditures.. Hwever Economist argue tht Transactionary Motive of money has a positive direct relationship to income i.e. Mt=f(Y) whch mean Mt depends on the level of income and Mt increases as a result of Y increase. . Precautionary motive is the desire for holding money for the purpose of unforseen circumstances... However, Economist have also argued tht precautionary motive of holding money has a positive direct relationship with the level of income i.e. Mp=f(Y) . Where Mp is the precautionary motive of holding money and Y is income... Nevertheless, the Speculative motive of holding money is the desire to hold money so as to yield interest or profit on the long run. For example speculative motives involves the keeping of money in order to buy goods when their prices are low and sells them when thier prices becomes high, thereby making a windfall gains.There is a negative direct relationship between speculative motive of holding money to interest rate i.e. Ms=f(r)... Hence demand for money refers to the total ammount of money balances whch people want to hold for certain purpose or motives.