University:
University of the People
Course:
BUS 2204 | Personal Finance
Academic year:

2023
Views:

123

Pages:

1
Author:

Lance Gutierrez

Discussion Forum There are three reasons why people demand money: for use in transactions, for precautionary reasons (meaning in case of emergencies) and for speculative safety (meaning in case some investments drop in value). Give an example of a time when you demanded money for each of these reasons. Describe the specific circumstances of your demand for money. People hold their assets as money so that they can purchase goods and services that money they held for purchase of goods and services is for everyday transactions such as buying groceries and medical purposes. (Rittenberg, L, and Tregarthen, T. (2012) Transactions demand is the amount of money needed to cover all the needs of an individual, firm or nation. (Houghton Mifflin Harcourt (2016). Few weeks ago, I wanted to buy a pair of shoes and I felt that I needed them. So I needed to conduct some transactions from my saver account since I had a demand for money For precautionary reasons, People frequently demand money as a precaution against an uncertain future. These include unexpected expenses such as house bills and medicals which require immediate payments. (Rittenberg, L, and Tregarthen, T. (2012). There was a time whereby my mother had an immediate effect sickness and was rushed to the hospital. Luckily we had a precautionary motive for demanding money. They didn't know exactly when the need for such expenditures will occur but they were prepared for it by holding money so that if in any case, something wrong or unexpected happens they will use it. For speculative safety, I’m not sure if I had an example into my life but I will explain what it’s all about. Money is an asset, so the demand for an asset depends on both its rate of return and its opportunity cost. Money holdings provide no rate of return and often depreciate in value due to inflation. Then the opportunity cost of holding money is the interest rate that can be earned by lending or investing one's money holdings. Therefore the speculative motive for demanding money arises in situations where holding money is perceived to be less risky than the alternative of lending the money. (Houghton Mifflin Harcourt (2016)

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Finance Self-Quiz Unit 1 Attempt Review 2

University of the People BUS 2204 | Personal Finance

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Three Reasons Why People Demand Money

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