State Whether the Following Illustrates the Speculative,precautionary or Transactions Motive

question 101

Essay

State whether the following illustrates the speculative,precautionary or transactions motive for holding money.
(a. )A bond broker holds cash for the possibility of buying a bond whose price is expected to rise.
(b. )John's mother tells him to keep $10 in his pocket any time he goes out in case he needs to put gas in the car.
(c. )Julio withdraws $100 from the bank to buy vegetables at the local organic farm market.
(d. )Mary takes out $50 from the bank to buy lunches during the week.
(c. )As stock prices begin to tumble,investors sell stock and increase their cash holdings.

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Definitions:

Francs

A former unit of currency in France and other countries, replaced by the Euro in many instances.

Utility Function

An equation that assigns numerical values to different combinations of goods and services, capturing the level of satisfaction or preference that an individual derives from these combinations.

Paasche Price Index

An economic measure that calculates the change in the level of prices of a basket of goods and services purchased in the current period, compared to a base period, using the quantities bought in the current period.

Laspeyres Price Index

An economic measure that calculates the change in the cost of acquiring a fixed basket of goods and services, based on the prices of those goods and services in a base period.