When the interest rate is low and the cost is low, people will hold more money to prevent accidents; When the market interest rate is high enough, people may try to take the risk of preventive currency reduction and convert this money into interest-bearing capital to obtain higher interest.
Speculative money demand is due to the uncertainty of future interest rates, and people adjust their asset structure in time to avoid capital loss or increase capital interest.
Extended data:
Range of price change
Because the price is rigid and the changing trend is generally upward, people are usually concerned about how to prevent the currency from depreciating or how to get compensation after devaluation.
This concern makes it difficult for banks engaged in money fund business to accept deposits without adjusting the nominal interest rate to adapt to rising prices. At the same time, the nominal interest rate of loans must be adjusted to adapt to the rise in prices, otherwise it will be difficult to obtain investment income. Therefore, the nominal interest rate level and the price level have a synchronous development trend, and the range of price changes restricts the nominal interest rate level.
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