Keynes called the money people hold in order to pay unforeseen or unexpected expenses the:
A) transactions demand for holding money.
B) precautionary demand for holding money.
C) speculative demand for holding money.
D) store of value demand for holding money.

Question

Quizplus · Accepted Answer

The precautionary demand for holding money refers to the money people hold in order to pay for unforeseen or unexpected expenses, such as a medical emergency or a car repair. This is distinct from the transactions demand for holding money, which refers to the money people need to carry out day-to-day transactions, and the speculative demand for holding money, which refers to the money people hold as a store of value or to take advantage of expected future price changes. The store of value demand for holding money is simply another term for the speculative demand.

Keynes Called the Money People Hold in Order to Pay