If Mr Wale took a loan for the purpose of investment, the demand for money is________________?

Analyze the question: Mr Wale borrows money in order to invest. We need to identify which motive for demanding money this represents.

Explain the concept: Keynes identified three motives for holding or demanding money:

1. Transactionary motive: money held for day-to-day purchases (food, transport, bills).
2. Precautionary motive: money held for unexpected events (illness, accidents, emergencies).
3. Speculative motive: money held to take advantage of future opportunities, such as buying shares, bonds, or other assets when prices or returns look favourable. It is linked to investment and to the interest rate.

Step-by-step solution:

• Wale is not borrowing for daily expenses, so it is not transactionary.
• He is not borrowing for an emergency, so it is not precautionary.
• He is borrowing to invest, which means putting money into a venture or asset in the hope of a return. This is the speculative motive.

Options A, B and D each include transactionary or precautionary motives, which do not fit. Only option C fits.

Answer: The demand for money here is the speculative motive, which is option C.

Exam tip: Match the keyword to the motive:

• Daily spending → Transactionary
• Emergency or unexpected → Precautionary
• Investment, profit, or buying shares or bonds → Speculative

Think "Speculative = Seeking profit."