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Economics (AS & A Level) · Oct / Nov 2021 · Paper 31 · Question 25

9708Money and banking

The Keynesian theory states that the demand for money (M^d) is influenced by the personal level of income (L_1) and by the rate of interest (L_2) so that M^d = L_1 (Y) + L_2 (r) What do L_1 and L_2 represent in the aggregate demand for money function?

  1. Aprecautionary motive | transactions motive
  2. Bspeculative motive | transactions and precautionary motives
  3. Ctransactions and precautionary motives | speculative motive
  4. Dtransactions motive | precautionary motive

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Correct answer: C. transactions and precautionary motives | speculative motive

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