Money is demanded for which of the following reasons?
-
to meet unforseen contigencies
- to solve the problem of inflation
- it is easily divisible
- it is portable
The correct answer is: A
Explanation
Money held to cater for unforeseen circumstances is referred to as the precautionary demand for money. In this case, money is kept for use in a contingency. That is, people maintain sufficient cash balance to act as a cushion or buffer against unexpected events.