If people are plungers and they believe that the normal interest
rate re, they will hold either all bonds or all money. Therefore the
speculative demand for money is discontinuous. A discontinuous
money demand function can only happen if people are plungers,
i.e. they will put all or none of their money into bonds.
As different individuals have different expectations regarding
interest rate and aggregation of the demand for money will yield a
demand for money curve that slopes continuously downwards.
Taking both his concepts of transaction demand and
speculative demand for money together, the Keynesian money
demand function can be represented as:
Md / P = f( r , Y)
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