Money and Interest Rates - The demand for money

4 important questions on Money and Interest Rates - The demand for money

What are the 3 motives for holding money? 

1. Transactions
2. Precautionary 
3. Speculative

What is L1 and what is L2? 

L1 = Transactions and precautionary 
L2 = Speculative

On what does the demand for L1 depend? Name 3/4.

1. The level of national income 
2. Frequency with which people are paind 
3. Institutional arrangements (use of credit or debit cards)
4. (rate of interest)
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On what does the demand for L2 deppend? Name 3. 

1. Rate of return on assets 
2. Anticipations about future movements in security prices 
3. Future movements in exchange rates

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