According to the liquidity preference theory
A) There is a precautionary motive for holding money
B) There is a speculative motive for holding money
C) There is a transnational motive for holding money
D) A and B above
E) None of the above

Question

Quizplus · Accepted Answer

The liquidity preference theory, proposed by John Maynard Keynes, suggests that people prefer to hold their wealth in liquid form for three main reasons: the precautionary motive (to cover unexpected expenses), the speculative motive (to take advantage of future investment opportunities), and the transactional motive (for everyday transactions). Thus, both A and B are correct.

According to the Liquidity Preference Theory