Quantum of transactions will determine demand for money. Why?

Because money is required to conduct transactions

The correct answer is option 2: Because money is required to conduct transactions

The demand for money tells us what makes people desire a certain amount of money. Since money is required to conduct transactions, the value of transactions will determine the money people will want to keep: the larger is the quantum of transactions to be made, the larger is the quantity of money demanded. Since the quantum of transactions to be made depends on income, it should be clear that a rise in income will lead to rise in demand for money..