Which one of the following statements is INCORRECT?

Step 1: Recall components of money demand in liquidity preference theory (Keynes).
Money demand $M^d = M_t^d + M_p^d + M_s^d$, where $M_t^d$ (transactions), $M_p^d$ (precautionary) are active demand (positively related to income $Y$, insensitive to interest rate $i$), and $M_s^d$ (speculative) is passive demand (inversely related to $i$): $M_s^d = f(i)$, $\frac{\partial M_s^d}{\partial i} < 0$. Higher $i$ increases opportunity cost of holding money, so passive demand falls.

Step 2: Option A claims positive relationship between interest rate $i$ and passive demand for money ($M_s^d$).
Formula: $M_s^d = L_s(i)$, with $\frac{\partial L_s}{\partial i} < 0$.
Substitute observation: As $i$ rises, $M_s^d$ falls.
Simplify: Positive relationship is incorrect; it is negative.

Step 3: Option B: Liquidity preference theory refers to demand for active and passive balances, determined by need for transactions and keeping wealth in money form.
This matches Keynes' theory: active for transactions/precautionary, passive for speculation/wealth. Correct.

Step 4: Option C: An increase in income causes demand for money for transactions purposes to increase.
Formula: $M_t^d = kY$, $k > 0$.
Substitute: $\Delta Y > 0 \implies \Delta M_t^d > 0$.
Correct.

Step 5: Option D: Purpose of financial market (money market) model is to explain how interest rate influences demand for money.
Money market: $M^s = M^d(Y, i)$, equilibrium sets $i$. Correct.

Step 6: Identify INCORRECT statement.
Only A is wrong.

A