Holding cash for which of the following reasons is an example of speculative demand?
A)Purchase of an input when there is an abrupt drop in the price
B)Quick acquisition of new raw materials for an emergency demand
C)A new shipment that has to be produced immediately because of product damage
D)Payments made to tax authorities

Question

Quizplus · Accepted Answer

Speculative demand for holding cash refers to holding cash to take advantage of investment opportunities that may arise in the future. In this case, holding cash to purchase inputs at a lower price than usual is an example of speculative demand. The other options do not involve holding cash for future investment opportunities.

Holding Cash for Which of the Following Reasons Is an Example