Suppose Bob converted his portfolio into cash in 2008 as a result of the bad return he has received in the stock market. In this scenario, the reason Bob holds on to money is the:

Question

Quizplus · Accepted Answer

The reason why Bob converted his portfolio into cash is because he has a need for liquidity, which is the main reason for holding money in the transactions demand for money. The speculative demand for money is holding cash as an investment due to the expectations of future changes in prices or interest rates, which is not applicable to this scenario.

Suppose Bob Converted His Portfolio into Cash in 2008 as a Result