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Speculative balances are pretty much money used to capitalize on an uncertain gain in the future.

For example... When interest rates are high people prefer to buy bonds because they believe that the next movement in the rate of interest will be downward so the bond prices will increase and they will make capital gains. But as interest rates decrease more and more people will stop investing in bonds because they believe the next movement in the interest rate will be up and bond prices will fall thus leading to capital losses. To avoid these capital losses, people hold more speculative balances (money).

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17y ago

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