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The demand for money is the total amount of money which all individuals in the economy wish, for various reasons, to hold. In other words, the demand for money refers to the desire to hold money, that is, keep one's resources in liquid form rather than spending it. The demand for money in economics is known as liquidity preference.
They are some motive or reasons responsible for the demand for money or to hold money there include:
Transaction art motives:
People desire to keep or hold money for day to day transactions or current expenditures. Household needs to hold money in order to cater for the interval between the receipt of incomes and their expenditures.
Precautionary motives:
This when people demand for money in order to meet up with unforeseen circumstances or unexpected expenditures. These may include sickness, unexpected visitors, etc. Due to uncertainties in life, people keep money against future emergencies that may require monetary expenditures.
Speculative motives:
This motive is specifically a business motive and refers to the desire to hold cash balance in order to embark on speculative dealings in the bond market. The demand to hold money for specific purpose is elastic.
They are some motive or reasons responsible for the demand for money or to hold money there include:
Transaction art motives:
People desire to keep or hold money for day to day transactions or current expenditures. Household needs to hold money in order to cater for the interval between the receipt of incomes and their expenditures.
Precautionary motives:
This when people demand for money in order to meet up with unforeseen circumstances or unexpected expenditures. These may include sickness, unexpected visitors, etc. Due to uncertainties in life, people keep money against future emergencies that may require monetary expenditures.
Speculative motives:
This motive is specifically a business motive and refers to the desire to hold cash balance in order to embark on speculative dealings in the bond market. The demand to hold money for specific purpose is elastic.
