Match the correct motive (Precautionary, Speculative, or Transactions) for holdi
ID: 1207500 • Letter: M
Question
Match the correct motive (Precautionary, Speculative, or Transactions) for holding money to the following definitions.
Identify the motive for holding money in the following scenario.
Daesun moves to a smaller apartment. Because of the lower monthly rent, he places a larger share of funds from his paycheck in a retirement fund and a smaller share in his savings account. This is an example of a decrease in Daesun's (Precautionary, Speculative, or Transactions) demand for money.
Complete the following statement about the relationship between the interest rate and speculative balances.
As the interest rate falls, the opportunity cost of holding money (rises, falls) , and people (decrease, increase) their speculative balances.
Definition The stock of money people hold to pay unpredictable expenses The stock of money people hold to take advantage of future changes in the prices of financial assets other than money The stock of money people hold to pay everyday predictable expensesExplanation / Answer
Answer:
The stock of money people hold to pay unpredictable expenses Precautionary Motive
The stock of money people hold to take advantage of future change in price of financial assets other than money Speculative Motive
The stock of money people hold to pay everyday predictable expences Transactions Motive
Answer :
Daesun moves ta a new apartment because of lower rent , he dose not need to have large amount for predictable expences. so he place his funds into retirement fund.
this is an example of a decrease in Transactions Motive demand for money.
Answer;
As the interest rate falls. the opportunity cost of holding money falls, and people increase their speculative balances.
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