Holding extra money in your checking account just in case your car needs to be repaired...
Holding extra money in your checking account just in case your car needs to be repaired is an example of which of the following motives for holding money?
| Transactions motive |
| Precautionary motive |
| Portfolio motive |
| Deferred payment motive |
Homework Answers
The answer to the above question is precautionary motive.
Explanation:
Precautionary motive is a relatively safe investment. Cash investments rarely lose value (as can stocks or bonds) and are therefore held for safety reasons in a balanced portfolio.
In economic theory, The precautionary demand for money is the act of holding real balances of money for use in a contingency. a need for money resulting from an unforeseen situation ( i.e car repairs in this situation)
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