What would the result be if the income stream of the average family suddenly became more unpredictable?
A)Households would want to hold larger cash balances.
B)Demand for money would shift to the left.
C)Households would want to hold smaller cash balances.
D)The money supply would shift to the right.

Question

Quizplus · Accepted Answer

If the income stream of the average family became more unpredictable, households would want to hold larger cash balances as a precautionary measure to buffer against future income shocks. They would want to have more money on hand to cover unexpected expenses or dips in income. This would increase the demand for money, as households would need to hold more cash to feel financially secure. Therefore, choice A is the correct answer.

What Would the Result Be If the Income Stream of the Average