The motive for holding money in response to expected changes in interest rates is known as the:
A) Transactions motive
B) Precautionary motive
C) Speculative motive
D) Liquidity motive
E) None of the above

Question

Quizplus · Accepted Answer

The speculative motive for holding money is related to expectations about future changes in interest rates. People hold money if they expect interest rates to rise, so they can lend it or invest it at higher rates later. Conversely, if they expect rates to fall, they might be more inclined to invest or lend money now. This motive is based on speculation about future interest rate movements.

The Motive for Holding Money in Response to Expected Changes