Precautionary Demand For Money Definition
Precautionary Demand For Money Definition. Money is needed to manage transactions, and the value of transactions decides the money people want to keep. Money performs two important functions:
Definition of precautionary demand for money the need to meet unexpected or extraordinary contingencies with a buffer stock of cash. Stock of money people hold to pay everyday predictable expenses. Precautionary demand describes the demand for financial assets to be held against an unforeseen event.
Precautionary Demand Describes The Demand For Financial Assets To Be Held Against An Unforeseen Event.
Definition of precautionary demand for money the need to meet unexpected or extraordinary contingencies with a buffer stock of cash. Circumspect , noncommittal , preparatory , preventive , provident , prudent , solid , sound Precautionary demand is the demand for highly liquid financial assets — domestic money or foreign currency — arising from preparedness for emergency expenditures.
That Is, Cash Or Bank Deposits Rather Than Investments.
Here you will find the the baisc to advance and most important economics mcqs for your test preparation. In this case, money is viewed as an asset class like any other with a rate of return and an opportunity cost of holding it. People do not keep their money holdings into the three separate purses with each purse labeled as the transactions, precautionary and speculative money purse.
Yet There Is Strong Reason For Believing That The Precautionary Demand
Speculative demand for money definition. To highlight the transactions motive for holding money, the early formulations of You may need money to anticipate if you are sick or lost your job.
Therefore, Demand For Money Is A Derived Demand.
There are several cases in which money is used as a speculative instrument: Precautionary demand for money definition. The need to have money available in such situations is referred to as the precautionary motive for demanding money.
The End Of Each Investment Period.2 Thus The Precautionary Demand For Money, By Which Is Meant The Cash Balance Held To Meet Unexpected Calls For Payment At Any Time, Is Not Discussed Under The Analysis Of Either The Transactions Demand Or The Asset Demand.
Economics mcqs for test preparation from basic to advance. Money is needed to manage transactions, and the value of transactions decides the money people want to keep. The money people hold for contingencies represents their precautionary demand for money.
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