Question

Given below are two statements, one is labelled as Assertion (A) and other one labelled as Reason (R).
Assertion (A): According to Keynes, an individual's aggregate demand to hold money is composed of Transaction Demand, Precautionary Demand, and Speculative Demand.
Reason (R): The Speculative Demand for money is a direct and positive function of the level of money income. In light of the above statements, choose the correct answer from the options given below:

• A. Both (A) and (R) are true and (R) is the correct explanation of (A).
• B. Both (A) and (R) are true but (R) is NOT the correct explanation of (A).
• C. (A) is true but (R) is false.
• D. (A) is false but (R) is true.

Hint:

Keynes’ money demand: Transaction and Precautionary (income-driven), Speculative (interest rate-driven).

Answer 1

The Correct Option is C

Step 1: Keynes lists transaction, precautionary, and speculative demand, so (A) is correct.
Step 2: Transaction and precautionary demand depend on income, but speculative demand depends on the interest rate.
Step 3: Speculative demand rises when interest rates fall, an inverse link, not a positive function of income.
Step 4: So (R) is false.
\[ \boxed{\text{Option (3): (A) is true, (R) is false}} \]