1.   Money balances held for this purpose are called idle balances.

2.   According to Keynesian theory, any extra money people have at this interest rate will simply go into idle balances.

3.   Expansion of the money supply in these circumstances may lead to no additional expenditure, only additional idle balances.

4.   The velocity of circulation will rise if there is a reduction in idle balances.

5.   The more idle balances fall, the more money will be available for spending.

6.   But why should idle balances fall?

7.   As interest rates begin to rise, so people choose to hold less idle balances.

8.   How much extra idle balances people will hold will depend on their expectations of changes in interest rates, prices and exchange rates.

9.   People simply hold the additional money as idle balances.