Question

Speculative demand for money is given by $M_s^d$ = .

• A. $\frac{r_{max}-r}{r-r_{min}}$
• B. $\frac{r_{max}+r}{r-r_{min}}$
• C. $\frac{r-r_{min}}{r_{max}-r}$
• D. $\frac{r_{max}+r}{r+r_{min}}$

Answer 1

The correct option is A $\frac{r_{max}-r}{r-r_{min}}$

Speculative demand for money is given by $M_s^d$= $\frac{r_{max}-r}{r-r_{min}}$
The speculative demand for money varies inversely with the interest rate.