Which of the following is another name for the Keynesian theory of demand for money?
Show answer & explanation
Correct answer: A
Explanation
Correct Answer:
Liquidity preference theory
Explanation:
The Keynesian theory of demand for money is also known as the Liquidity Preference Theory. It was developed by John Maynard Keynes. According to this theory, people prefer to hold money for three main purposes: transactions, precautionary needs, and speculative motives.
Key Points:
This theory was proposed by Keynes
There are three motives for holding money: transactions, precautionary, and speculative
Interest rate affects the demand for money
People prefer liquidity over other assets
Additional Facts:
It was presented in Keynes’ 1936 book The General Theory of Employment, Interest and Money
It is a key foundation of modern macroeconomics
It explains the relationship between interest rates and money demand
Important Questions:
Q1: What is the Keynesian theory of money demand based on?
Ans: Demand for money
Q2: How many motives of money demand are there?
Ans: Three
Q3: Who proposed this theory?
Ans: John Maynard Keynes