Question

What does the transactions motive refer to? (more in-depth)

A) The desire to hold money for future investment opportunities
B) The need to hold money for everyday transactions
C) The preference for money over other assets
D) The speculative nature of holding money

Answer 1

The transactions motive refers to the need to hold money for everyday transactions, such as buying groceries or paying bills.

Step-by-step explanation:

The transactions motive refers to the need to hold money for everyday transactions. It involves keeping money readily available to settle day-to-day expenses such as buying groceries or paying bills.

The desire to hold money for future investment opportunities is known as the speculative motive, not the transactions motive.

For example, consider a student who needs money to buy lunch at school. They will keep a certain amount of money in their wallet or bank account to cover their daily expenses.