Mark holds $100 in cash in his wallet to make purchases for gas and groceries.This represents the
A)Precautionary demand for money.
B)Transactions demand for money.
C)Speculative demand for money.
D)Market demand for money.

Question

Quizplus · Accepted Answer

The fact that Mark is holding $100 in cash specifically to make purchases for gas and groceries suggests that this is a transactions demand for money - he needs cash to conduct everyday transactions. The precautionary demand for money would be if he were holding onto cash as a precaution for unexpected expenses, and the speculative demand for money would be if he were holding onto cash as a speculative investment. The market demand for money refers to the collective demand for money by all the agents in an economy, so this does not apply to Mark's individual situation.

Mark Holds $100 in Cash in His Wallet to Make