A firm that holds cash to avoid penalties associated with the late payment of bills is demonstrating which type of demand for money?

Question

Quizplus · Accepted Answer

The firm holding cash to avoid penalties is demonstrating a precautionary demand for money, which is the demand for money as a hedge against unexpected events. This includes the need to hold cash for emergencies and to avoid unexpected penalties or expenses.

A Firm That Holds Cash to Avoid Penalties Associated with the Late