A person keeps $500 in his home in order to be prepared for some unforeseen future event. This reflects his

Question

Quizplus · Accepted Answer

The person is keeping the $500 as a precautionary measure, in case of any unforeseen future event, such as an emergency or unexpected expense. This reflects a precautionary demand for money, which is the demand for money as a buffer against unexpected events. It is one of the three main motives for holding money, along with the transaction motive and the speculative motive.

A Person Keeps $500 in His Home in Order to Be