People learn to hold a specific quantity of money for their groceries, theatre tickets, petrol, clothes, film and other items they habitually purchase. This behaviour is representative of the:
A) precautionary demand.
B) speculative demand.
C) transactions demand.
D) volatility demand.

Question

Quizplus · Accepted Answer

The behaviour described in the question is characteristic of the transactions demand for money, which refers to the need for money to conduct routine purchases and transactions. The other options do not apply in this context: precautionary demand refers to the desire to hold extra money as a buffer against unforeseen events, speculative demand involves holding money to take advantage of future financial opportunities, and volatility demand is not a commonly used term in economics.

People Learn to Hold a Specific Quantity of Money for Their