Question

Drag the tiles to the correct boxes to complete the pairs. For each scenario match it to the correct factor describing the purpose for holding money. When price levels rise, people hold onto cash. When interest rates are low, people forgo interest income. When aggregate income is high, people hold cash to buy goods that are plentiful and cheap. When interest rates are low, people speculate that they will soon increase. Andy decided to hold his money in cash, as he did not earn sufficient money as income from interest. arrowRight Ben is a consumer and decides not to purchase luxury items because they are too expensive. arrowRight Chad thinks it to be a good opportunity to buy the products from the market as the supply has increased. arrowRight Daphne is holding onto her money as she feels that the interest rate will go up soon. arrowRight

Answer 1

The purpose for holding money in economic in classified into:

• transactional motive
• precautionary motive
• speculative motive

The Drop-downs includes:

• When price levels rise, people hold onto cash. - Speculative motive

• When interest rates are low, people forgo interest income - Speculative motive

• When aggregate income is high, people hold cash to buy goods that are plentiful and cheap - Transactional motive.

• When interest rates are low, people speculate that they will soon increase - Speculative motive

• Andy decided to hold his money in cash, as he did not earn sufficient money as income from interest. - Speculative motive

• Ben is a consumer and decides not to purchase luxury items because they are too expensive - Speculative motive

• Chad thinks it to be a good opportunity to buy the products from the market as the supply has increased. - Transactional motive

• Daphne is holding onto her money as she feels that the interest rate will go up soon - Speculative motive

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