Answer to Question #218739 in Macroeconomics for Sayyed mohd arif

Question

The notion of a demand for money may strike you at first glance as bizarre. The demand for
money is the total amount of money that the population of an economy wants to hold. There are
three main reasons to hold money, as opposed to bonds, equity, or other financial asset classes,
Explain in detail.

Answer 1

The reason for holding money is for a transaction, precautionary and speculative motives. For transaction motive, money is used to pay for the goods and services on daily purchases. For precauti9onary motive, money is invested because invested cash rarely loses value such as stocks thus can be held for safety reasons in a balanced portfolio.in speculative motive, money can provide a return to their holders