Demand For Money

Keynes’s hypothesized that the transactions component of money demand was primarily determined by the level of

• interest rates

• velocity

• income

• stock market prices

Keynes argued that the transactions component of the demand for money was primarily determined by the level of people’s _____, which he believed were proportional to _____.

• transactions; income

• transactions; age

• incomes; wealth

• incomes; age

Keynes’s hypothesized that the precautionary component of money demand was primarily determined by the level of

• interest rates

• velocity

• income

• stock market prices

Keynes argued that the precautionary component of the demand for money was primarily determined by the level of people’s _____, which he believed were proportional to _____.

• incomes; wealth

• incomes; age

• transactions; income

• transactions; age

The demand for money as a cushion against unexpected contingencies is called the

• transactions motive.

• precautionary motive.

• insurance motive.

• speculative motive.

Keynes’s hypothesized that the speculative component of money demand was primarily determined by the level of

• interest rates

• velocity

• income

• stock market prices

The speculative motive for holding money is closely tied to what function of money?

• Store of wealth

• Unit of account

• Medium of exchange

• None of the above

Of the three motives for holding money suggested by Keynes’s, which did he believe to be the most sensitive to interest rates?

• The transactions motive

• The precautionary motive

• The speculative motive

• The altruistic motive

Because Keynes’s assumed that the expected return on money was zero, he argued that

• people would never hold money.

• people would never hold money as a store of wealth.

• people would hold money as a store of wealth when the expected return on bonds was negative.

• people would hold money as a store of wealth only when forced to by government policy.

The Keynesian theory of money demand predicts that people will increase their money holdings if they believe that

• interest rates are about to fall.

• bond prices are about to rise.

• expected inflation is about to fall.

• bond prices are about to fall.