George makes $250 a week working as a student aid. When he cashes his check he takes $100 to the cashiers office to pay part of his tuition. $25 goes to paying off his books, $75 goes for entertainment and $50 he keeps for unexpected expenditures. Which of the following statements is true?

Question

Quizplus · Accepted Answer

The transactions demand for money is the money needed for day-to-day expenses, such as tuition and other bills. In this case, it is $100 for tuition and $25 for books, which totals to $125. 
The precautionary demand for money is the money kept for unexpected expenditures, which in this case is $50. 
Hence, the asset demand for money is calculated as $250 - ($125 + $50), which is equal to $75. Therefore, the correct option is D.

George Makes $250 a Week Working as a Student Aid