Which reason for holding money motivates investors to buy bonds when interest rates are low, anticipating selling them later at higher rates for a gain?

Multiple choice question for Money, Interest Rates And Output. Select an option, then review the explanation below.

Explanation

The speculation motive involves holding bonds or assets when interest rates are low, expecting to sell them at a profit when rates rise. This contrasts with the transactions motive, which is about everyday expenses, and the precautionary motive, which is for unexpected needs.

Practice related questions from the same subject.

1.How does a decrease in interest rates affect the monetary base, consumer credit availability, and the cost of consumer credit?
2.Which variable do central banks typically set directly, and which variable adjusts as a consequence?
3.What is it called when the central bank purchases financial assets in the open market to expand the monetary base?
4.M4 is considered a __________ monetary aggregate and encompasses deposits held at both __________ and __________?
5.Assuming all other factors remain constant, what happens to the quantity of real money holdings when interest rates increase?

Which reason for holding money motivates investors to buy bonds when interest rates are low, anticipating selling them later at higher rates for a gain?

Explanation

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