Question

According to Keynes, what three things influenced people’s demand for money? How has technology changed peoples demand for money?

Answer 1

According to Keynes, three things influenced people’s demand for money are:

Transaction motive: People demand money for day to activities which has exchange of money.

Precautionary motive:These are emergency expenses like medical bill or car repair.

Speculative motive: Money can store its value. It is also an asset and investments can offer rates of return. Rates of interest or share market returns will decide its demand.

With evolution of technology demand for money has gone up. Automated Teller Machines (ATMs), internet banking, plastic money(credit and debit cards) have increased demand for money. It is now possible for people to spend beyond their means through technological advances like plastic money, bank pre-approved loans etc.