Suppose Bob holds cash because he expects to need it in the future and it may be costly for him to convert his assets into money later, then the reason Bob holds on to money is the:

Question

Quizplus · Accepted Answer

Bob's reason for holding cash is because he needs it to be easily accessible for future transactions or emergencies, which is the liquidity demand for money. The speculative demand for money is when people hold onto cash because they expect money to decrease in value, while the transactions demand is for buying goods and services.

Suppose Bob Holds Cash Because He Expects to Need It