The precautionary demand for money:
A) varies inversely with the income level.
B) varies inversely with the price level.
C) is used as an insurance agent against unexpected needs.
D) states that nominal income must exceed real income.
E) is a classical concept in monetary theory.

Question

Quizplus · Accepted Answer

The precautionary demand for money is used as an insurance agent against unexpected or uncertain needs. It is held as a precautionary measure to cover any unforeseen expenses or emergencies.

The Precautionary Demand for Money