If Mr Wale took a loan for the purpose of investment, the demand for money...
ECONOMICS
JAMB 2016
If Mr Wale took a loan for the purpose of investment, the demand for money is________________?
- A. Precautionary motive
- B. Transactionary and Precautionary motive
- C. Speculative motive
- D. Speculative and Transactionary motives
Correct Answer: C. Speculative motive
Explanation
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. We hold cash rather than other assets whose values are falling. We hold on to cash to be able to buy them when their prices actually fall. So this is money held to play the market. It is money held to buy (or sell) bonds, depending on one's expectations of future interest rates.
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