economics hard MCQ

According to the Liquidity Preference Theory proposed by John Maynard Keynes, the demand for money is primarily driven by which three motives?

  1. Transaction, Precautionary, and Speculative motives
  2. Investment, Savings, and Consumption motives
  3. Inflation, Deflation, and Stagflation motives
  4. Profit, Utility, and Equilibrium motives

Answer: Transaction, Precautionary, and Speculative motives

Keynes argued that people hold liquid cash rather than interest-bearing assets for three reasons: the Transaction motive (for daily purchases), the Precautionary motive (for unforeseen emergencies), and the Speculative motive (to profit from future changes in bond prices and interest rates). This theory fundamentally links money demand to the prevailing interest rate.

Topic Macroeconomics - Money
Exam Relevance UPSC Prelims, SSC CGL
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