Question

John Maynard Keynes argued that people demand money for three reasons. What are these three reasons?

1) Transactions motive, precautionary motive, and speculative motive
2) Quantity motive, speculative motive, and philanthropic motive
3) Transactions motive, precautionary motive, and familial motive
4) Precautionary motive, speculative motive, and wealth motive

Answer 1

John Maynard Keynes argued that individuals demand money for the transactions motive, precautionary motive, and speculative motive. These motives underline the necessity for liquid finances for daily transactions, unforeseen expenses, and investment opportunities, respectively.

Step-by-step explanation:

John Maynard Keynes, a notable British economist, postulated that people demand money for three primary reasons: transactions motive, precautionary motive, and speculative motive. The transactions motive relates to the need for money to conduct everyday transactions and purchases. The precautionary motive emerges from the desire to have liquid funds available for unexpected expenses or financial emergencies. Lastly, the speculative motive is the desire to hold cash to take advantage of potential investment opportunities, typically to profit from market fluctuations.

Keynes's theories have heavily influenced modern economics and governmental fiscal policies, especially through his book The General Theory of Employment, Interest, and Money. Here Keynes outlined his views on government intervention during economic downturns, advocating for increased spending as a means to stimulate demand and increase production and investment.