What is speculative motive for demand for money?

Definition: It is a tactic used by investors/ traders to hold cash so as to make the best use of any investment opportunity that arises later on. In such a situation, the cash kept aside by the investor equips him to exploit such an attractive investment opportunity. This is known as speculative motive.

Who gave speculative demand for money?

(a) Speculative demand for money (MSd): Thus, according to Keynes there are two types of assets, i.e., money and bonds.

What is speculative demand for money how it is related to the rate of interest?

The speculative demand for money is inversely related to the interest rate. When the interest rate on securities is very high, then people expect interest rates to fall in future. This implies that in future bond prices will rise indicating capital gain to the bond-holders.

What is speculative demand for money investopedia?

Stakeholders may also have a speculative motive. When interest rates are low, demand for cash is high and they may prefer to hold assets until interest rates rise. The speculative motive refers to an investor’s reluctance to tying up investment capital for fear of missing out on a better opportunity in the future.

What is money demand and money supply?

While the demand of money involves the desired holding of financial assets, the money supply is the total amount of monetary assets available in an economy at a specific time.

What is meant by demand of money?

In monetary economics, the demand for money is the desired holding of financial assets in the form of money: that is, cash or bank deposits rather than investments. The demand for M1 is a result of this trade-off regarding the form in which a person’s funds to be spent should be held.

What does PY mean in economics?

Page 1. MV = PY. M = money supply, V = velocity of money, P = price level, Y = real GDP.

What does speculative balance mean?

The balance of cash that is held in order to take advantage of any unpredictable bargain.

What do you mean by money demand?

In monetary economics, the demand for money is the desired holding of financial assets in the form of money: that is, cash or bank deposits rather than investments.

What determines money demand?

The demand for money is affected by several factors, including the level of income, interest rates, and inflation as well as uncertainty about the future.

What are the two types of demand for money?

Given our explanations of the functions of money, it will not be surprising that there are two different types of demand for money. The first is called the transactions demand and the second is called the asset demand.

What are the three types of demand for money?

The way in which these factors affect money demand is usually explained in terms of the three motives for demanding money: the transactions, the precautionary, and the speculative motives.

What is the speculative motive for holding money?

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. A strategy in which one holds cash apart from any other investments just in case an attractive investment opportunity arises.

What are the determinants of the demand for money?

Transactions demand, in economic theory, specifically Keynesian economics and monetary economics, is one of the determinants of the demand for money, the others being asset demand and precautionary demand.

What is the total demand for money?

The demand for money refers to the total amount of wealth held by the household and companies. The demand for money is affected by several factors such as income levels, interest rates, price levels (inflation), and uncertainty.

What is the demand curve for money?

Money demand curve illustrates the relationship between the quantity of money demanded and the interest rate. As expected, it is negatively sloped given the fact that people tend to hold lesser quantity of money and invest more as interest rate increases.