Transaction motive

The transaction motive is one reason that there is demand for money in an economy according to the keynesian monetary theory.

The transaction motive means that money is requested in order to purchase goods and services in the economy. Demand for money according to a transaction motive depends on the size of the gross domestic product.

The transaction motive to money demand is higher with a larger quantity of goods and a higher price level. A higher price level will thus lead to higher interest rates.