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Keynes argued that there are three motives for holding money.First, individuals will demand money to finance their daily purchases of goods and services. Secondly, people will demand money as a contingency against unforeseen expenditures. Thirdly, people will hold money as a store of wealth. In particular, people hold money for speculative purposes because they are unsure about the returns from the alternative financial assets in which they could hold their wealth, i.e., bonds.Money kept as a store of wealth comes within this category.
They also must keep some money in hand for their day-to-day transactions.
The amount of money, required for this purpose, depends upon the general level of business activity.
Bond prices are inversely related to the interest rate and, therefore, if an individual expects a sharp rise in the interest rate, this is the same as expecting a corresponding sharp fall in bond prices and again he will hold only money.
Keynes supposed at the aggregate level that individuals hold a wide variety of different views about expected rates of interest in future and therefore as the current rate of interest fell more and more people would expect that eventually it would rise again — the price of bonds would fall — and therefore more people would hold only money.
(2) The precautionary motive: Liquid balances are required to be kept in hand to provide for emergencies like sickness or accident.
Everyone likes to keep some money in hand by way of precaution against such contingent liabilities and unforeseen expenses.In fact, the rate of interest does the job of equating the quantity of money demanded to the available supply, i.e., it does the job of producing monetary equilibrium. 3 we see how the rate of interest ensures monetary equilibrium.The money supply is fixed by the central bank at Mo.GREEN BANKING – A CONCEPTUAL FRAMEWORK ABSTRACT Banks in India are now promoting more conscious in sustainable development of the world.In this respect, RBI has introduced the new concept called Green Banking.The returns from holding bonds has two components, viz., the interest payments and the possibility of a capital gain or loss.If the expected loss is greater than the interest payments the net return is negative and the individual concerned will hold no bonds, only money.Key Words: Green Banking, Paperless Banking, RBI, Products and Services INTRODUCTION Today we are facing so many problems relating to the environment. Climate change is occurring due to the effect of greenhouse gas; climate change creates global warming.To avoid such a problem now, most of the industries are taking some green initiatives such as the reduction of carbon footprint and energy consumption, investing in eco-friendly projects, etc.The demand for money comes from the desire to hold liquid assets of which money is the only perfect example.It may be noted that money is not demanded for its own sake but because it can be used to purchase economic goods and services.