3) Why do people elect to hold money? - be sure to explain the three types...
3) Why do people elect to hold money? - be sure to explain the three types of demand for money.
Homework Answers
People hold money for three motives and they are transaction motive, precautionary motive and for speculative motive.
- Transaction motive- Here the people will hold money meeting the day to day expenses, the most of the transaction need the exchange of money. For example: Purchasing grocery, buying movie tickets and etc....
- Precautionary motive- The people hold money for meeting the unexpected contingencies such as the medical bills, motor vehicle repairs and so on.....
- Speculative motive- Here the people use money for investing in some of kind of riskier asset such as the securities. The people invest money in interest bearing assets because there is an opportunity cost associated with holding the money.
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3) Why do people elect to hold money? - be sure to explain the
three types...
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