If Mr Wale took a loan for the purpose of investment, the...
If Mr Wale took a loan for the purpose of investment, the demand for money is________________?
Precautionary motive
Transactionary and Precautionary motive
Speculative motive
Speculative and Transactionary motives
Correct answer is C
Speculative motive: A desire to hold cash in order to be poised to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
* We hold cash rather than other assets whose values are falling.
* We hold on to cash to be able to buy them when their prices actually fall.
* So this is money held to play the market.
* It is money held to buy (or sell) bonds, depending on one's expectations of future interest rates.
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