Keynes Liquidity Preference Theory
Keynesian theory considered money as a store of value in
addition to a medium of exchange.
Transaction and Precautionary Demand for Money
Keynes, like the classical economists, held the view that real
income was the most important determinant of the transaction
demand and precautionary demand for money.
Therefore, according to Keynesian theory, both the transaction and
precautionary demand for money are proportional to income.
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