Precautionary motive

Precautionary motive - Precautionary motive Money demanded...

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Precautionary motive: Money demanded to satisfy the precautionary motive is for meant for unforeseen circumstances. This amount of money kept aside can be used during times of uncertainty or emergency. An individual or a household creates such demand to face future possibility of accident, sickness, unemployment, old age, education of the children etc. The firms, corporate bodies and governmental agencies also demand money to meet the precautionary motive. Fluctuating economic conditions , future uncertainties, sudden needs of expenditure, failure of expectations are some of the examples which necessitate such demand for money. Even this type of demand for money is more or less steady in its amount. It depends mainly on the size and responsibilities of the family and size of the income. In the short run these factors remain constant and hence demand for money also remains nearly constant. Speculative motive
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Precautionary motive - Precautionary motive Money demanded...

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