This preview shows page 1. Sign up to view the full content.
Unformatted text preview: of their distinct approach to demand for money or liquidity . The classical economists assume that Transactions motive and Precautionary motive are the only two motives to be satisfied by the demand for money. But Keynes observed that in the modern economy there is a class of speculators who hoard large quantities of liquid resources. The demand for money made by speculators is meant for investing in securities when market conditions are favorable and to withdraw the demand by selling securities when it is profitable. Therefore the Speculative motive creates demand for liquidity with an intention of making capital gains out of fluctuating market conditions for securities. Speculative demand for money is Keynes novel concept and it has caused a fundamental change in the traditional monetary theory....
View Full Document
This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.
- Fall '10