Why do people hold money (currency and checking account balances), and thereby forego earning interest or dividends from a financial investment?
A) Some money is demanded for everyday transactions like parking fees, lunch, and buying groceries.
B) Some money is demanded as a precaution against unexpected costs such as automobile repairs, speeding tickets, or temporary loss of a job.
C) Some money is demanded for speculative purchases of stocks, bonds, or collectibles in case they become available at a particularly low price.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

People hold money for various reasons. Some money is demanded for everyday transactions like parking fees, lunch, and buying groceries (Option A). Some money is demanded as a precaution against unexpected costs such as automobile repairs, speeding tickets, or temporary loss of a job (Option B). Finally, some money is demanded for speculative purchases of stocks, bonds, or collectibles in case they become available at a particularly low price (Option C). Therefore, all options (A, B, and C) are correct.

Why Do People Hold Money (Currency and Checking Account Balances)