When a household takes extra (unbudgeted) money on a trip, economists would classify this money as held for a(n):
A) speculative demand.
B) transactions demand.
C) emergency motive.
D) precautionary demand.
E) inflationary motive.

Question

Quizplus · Accepted Answer

Precautionary demand refers to the demand for money to meet unforeseen and unpredictable expenses. Taking extra money on a trip that was not budgeted for can be considered a precautionary demand as it serves as a financial buffer in case of unexpected expenses or emergencies during the trip.

When a Household Takes Extra (Unbudgeted) Money on a Trip