Question Three [Total 30 marks] (a) Explain the three motives behind the demand for money in Keynes' liquidity preference theory. (6 marks) (b) Compare and explain the economies of scale in the transactions demand for money (Md) in the Baumol/Tobin Model and Quantity Theory of Money (QTM)? (6 marks) (c) How would the transactions demand for money change in the Baumol/Tobin Model) if salaries are paid yearly (once a year) rather than monthly? (6 marks) (d) All else being equal, how would each of the following affect precautionary demand for money. Explain with the aid of correctly-labelled diagram. i. In times of economic boom, people earn more income. ii. A decrease in brokerage fee. Stocks are rewarded with higher return. (4 marks) (4 marks) (4 marks) 111