Which of the following is another name for the Keynesian theory of demand for money?
Liquidity preference theory
Liquidity preference theory is correct.
John Maynard Keynes, in The General Theory (1936), explained the demand for money through people's preference for holding wealth in liquid form. He identified three motives for holding money: the transactions motive, the precautionary motive and the speculative motive.
Because the theory rests on this preference for liquidity, the Keynesian theory of demand for money is also called the liquidity preference theory; the speculative demand makes money demand depend inversely on the rate of interest.
The Cambridge theory and the cash balance approach are the same pre-Keynesian idea of Marshall and Pigou (money demand as a fraction of income, M = kPY). The classical approach is the quantity theory of money of Fisher. None of these is the Keynesian theory.
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Important Questions from Money and Banking
Which one of the following is likely to be the most inflationary in its effects?
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements :
The effect of devaluation of a currency is that it necessarily
1. improves the competitiveness of the domestic exports in the foreign markets
2. increase the foreign value of domestic currency
3. improves the trade balance
Which of the above statements is/are correct?
Indian Government Bond Yields are influenced by which of the following?
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
With reference to “Urban Cooperative Banks" in India, consider the following statements :
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966
Which of the statements given above is/are correct?
