The correct answer is Option 3: a and c
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a) Transaction motive of holding money means to have money in liquid form to pay the bills. This is true. The transaction motive refers to the need to hold money in liquid form to facilitate everyday transactions and payments.
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b) Speculative motive will lead to reduced demand for money when interest rates are low in the economy. This is false. The speculative motive suggests that people may hold onto money to take advantage of future investment opportunities. When interest rates are low, people might prefer to hold more money rather than invest, increasing the demand for money, not reducing it.
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c) If the market rate of interest is low enough, the economy may experience a Liquidity Trap. This is true. A liquidity trap occurs when interest rates are very low, and people prefer to hold onto cash rather than invest it even at low returns. This can hinder efforts by the central bank to stimulate the economy through traditional monetary policy tools.
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