Transactions demand for money, Microeconomics

Assignment Help:

Transactions demand for money:

Transactions demand for money represents cash balances held by economic agents in order to carry outordinary everyday transactions.For example, individual consumers need to hold money to buy food, cloth, pay bus fares, and so on. Similarly, business organizations need money to pay wages and electricity bills, buy raw materials, fuel for vehicles, etc.the transactions demand for money is directly related to income, and inversely related to the rate of interest that could be earned from holding interest-yielding assets in the alternative.

The precautionary motive, on the other hand, refers to holding cash balances as a precaution against unexpected events. For instance, people hold money to provide them with some degree of security against sudden illness, accidents, fire or flood disaster, and so on. The main factor influencing this motive is the level of income.


Related Discussions:- Transactions demand for money

What is framework in the modern economics, What is framework in the Modern ...

What is framework in the Modern Economics? Framework in the Modern Economics: The framework is a framework which uses to deal along with daily activities and is utilized to

What is the benefit from the existence of monopolies, Explain how consumers...

Explain how consumers might benefit from the existence of monopolies. While the standard issue of monopolies having higher prices and lower output that competitive markets migh

What is neoliberalism, Neoliberalism So much thinking about the proper ...

Neoliberalism So much thinking about the proper role of government in economic growth over the past 2 decades has tends to conclusions which are today known as neo-liberal. The

What is the major function of commercial banks?, They take deposits which m...

They take deposits which mean borrow money and make loans which means lend money. The interest rate they pay on the deposits is less than the interest rate they charge on their loa

What is cost effectiveness analysis, Q. What is Cost effectiveness analysis...

Q. What is Cost effectiveness analysis? Cost effectiveness analysis A method which seeks to identify the least cost option for meeting a particular objective. It actives prior

Q=8L^1/2, what is the profit maximising quantity of L

what is the profit maximising quantity of L

Explain low-quality beef , Suppose that you can produce high-quality beef a...

Suppose that you can produce high-quality beef at $3 per pound and sell it for $8 per pound. Low-quality beef costs $1 to produce but only sells for $4 per pound. If quality is uno

Explain about neoliberalism, Q. Explain about Neoliberalism? Neoliberal...

Q. Explain about Neoliberalism? Neoliberalism: A modern, harsher incarnation of capitalism that became dominant globally beginning in early 1980s, largely as a reaction to inte

Indifference curve, What is indifference curve and its properties?

What is indifference curve and its properties?

Elasticity, what are the uses of elasticity to the private sector

what are the uses of elasticity to the private sector

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd