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Which of the following statements is/are TRUE in respect of the demand for money? 1. The...

Which of the following statements is/are TRUE in respect of the demand for money?
1. The speculative demand for money is a function of the interest rate.
2. The transactions demand for money is a function of the interest rate.
3. The precautionary demand for money is a function of national income.
a) Statement 1 only.
b) Statement 2 only.
c) Statements 3 only.
d) Statements 1 and 2 only.
e) Statements 1 and 3 only.

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Option A

Statement 1 only.
The speculative demand for money is a function of the interest rate.

The three reasons of the demand for money are speculative motive, transactions motive and precautionary motive. Speculative demand means the demand for financial assets, such as money,securities. The speculative demand for money is a function of the interest rate.

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