PRC-3 · Chapter 17 · Question 4 of 20
According to Keynesian Liquidity Preference theory, an investor decides to hold physical cash rather than buying bonds because he believes bond prices are currently too high and will soon crash. Which motive for holding money is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Speculative motive
Explanation
The speculative motive involves holding cash to take advantage of future changes in the prices of financial assets (like bonds) or interest rates.
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