What is the motive behind holding money for everyday transactions called?
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Answer: C. Transactions motive
Explanation
The transactions motive describes holding money specifically for daily purchases and expenses. Households and businesses need liquid cash balances to bridge income and expenditure gaps. Frequency of income receipt directly influences the size of transaction money balances. Money serves as a primary medium of exchange in commercial market economies. Liquidity allows individuals to complete trades without immediate barter constraints. Monetary theory categorizes money demand into transaction, precautionary, and speculative motives.
Retail banking systems facilitate everyday transactions through checking accounts and digital payments. Inflation erodes the purchasing power of money held for daily transactional needs. Consumers balance cash holdings against interest-earning savings accounts for daily budgeting. Profit motive drives business investment rather than the demand for transactional money. Precautionary motive involves holding cash reserves for unexpected future emergencies. Speculation motive leads investors to hold bonds or cash based on interest rate forecasts.
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Answer: D. the additional revenue the firm makes by selling one unit of labour.
The key lists selling a unit of labour, whereas the standard definition is the extra revenue from employing an additional unit of labor.
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Q4. What determines the value of the marginal propensity to consume?
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