The motives for holding money are :
(A) Transaction
(B) Speculative
(C) Precautionary
(D) Credit creation
(E) Lending
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is option (4) : (A), (B) and (C) Only
The primary motives for holding money are as follows:
- Transaction Motive (A): People hold money to carry out everyday transactions, such as buying goods and services.
- Speculative Motive (B): People hold money to take advantage of future investment opportunities or to avoid potential losses from other investments.
- Precautionary Motive (C): People hold money to cover unexpected expenses or emergencies.
The other options:
- Credit Creation (D): This is not a motive for holding money but rather a process conducted by banks through lending.
- Lending (E): This is an action taken with money, not a motive for holding it.