Answer to Question #265315 in Macroeconomics for Natash

Question

Explain the relationship between the rate of interest and demand for money within the Keynesian theory of money demanded.

How does this differ from the classical quantity theory of money demand?

Answer 1

According to Keynes, when interest rates are low, demand for cash is high and they may prefer to hold assets until interest rates rise.

According to classical theory, the rate of interest is determined by the supply of and demand for savings.