Which of the following is not a broad motive for holding money?

Consumption motive

The correct answer is Option 3: Consumption motive

According to Keynes, the broad motives for holding money are:

• Transaction motive:  This refers to holding cash to carry out day-to-day transactions. Since there is usually a time gap between receiving income and spending it, people keep liquid money to pay for regular expenses like groceries, bills, and rent.
• Precautionary motive (Not given in NCERT): This involves holding money as a safety net for unforeseen contingencies or emergencies, such as sudden medical expenses or repairs.
• Speculative motive: his is the desire to hold cash to take advantage of future changes in interest rates or asset prices. For example, if people expect interest rates to rise (and bond prices to fall), they may hold onto cash now to buy bonds later at a cheaper price.

“Consumption motive” is not included among the recognized motives for holding money. While we do hold money to "consume" goods, that action is technically covered under the Transaction Motive. In economics, we don't classify "consumption" as a separate motive for holding liquidity; rather, consumption is the reason for the transaction itself.

NCERT: Money is the most liquid of all assets in the sense that it is universally acceptable and hence can be exchanged for other commodities very easily. On the other hand, it has an opportunity cost. If, instead of holding on to a certain cash balance, you put the money in a fixed deposits in some bank you can earn interest on that money. While deciding on how much money to hold at a certain point of time one has to consider the trade off between the advantage of liquidity and the disadvantage of the foregone interest. Demand for money balance is thus often referred to as liquidity preference. People desire to hold money balance broadly from two motives.

• For Transaction Motive: Money is held to facilitate daily transactions such as purchasing goods and services. It is needed to manage and make payments for regular expenses.

• For Speculative Motive: People may hold money to take advantage of potential investment opportunities when interest rates are favorable or when they anticipate changes in market conditions that might affect asset prices.