Question

why does the speculative demand for money curve never touches X axis​

Answer 1

why does the speculative demand for money curve never touches X axis​

Answer:

In transaction and precautionary demand for money (M1) is shown along X-axis and rate of interest is shown on Y-axis. Since, transaction and precautionary demand depend upon the GDP level and price level and is largely independent and unresponsive to interest rate changes, the liquidity preference curve with regard to these motives (LP1) is a parallel straight line at a distance of OA on the X-axis. This means, that money demand M1 is OA, whatever, be the rate of interest P0, P1 and P2.

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