Keynesian version / Theory on money demand Definition of money demand According to J.M. Keynes , money performs both functions of medium of exchange and store in value. Under the medium of exchange, M d (where M d = money demand) is for transaction of various goods and services. Similarly under store in value, M d is for securing purchasing power in the market, to be wealthy in the society, to take precaution in the future rainy days and further income generation by investing it on various financial assets that can easily be converted into cash at any time. Hence, money is demanded by people with three different motives like: a. Transaction motive (M d t)… for goods and services b. Precautionary motive (M d p) c. Speculative motive (M d s)… for bills and bonds So, the total money demand (M d T) = (M d t + M d p + M d s) a. Transaction money demand (M d t) For consumers it depends upon size of income accumulati
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