A Major Difference Between the Transactions Demand for Money and the Precautionary

question 173

Multiple Choice

A major difference between the transactions demand for money and the precautionary demand is that the

• A) transactions demand means that people are foregoing interest but they are not foregoing interest in the precautionary demand.
• B) transactions demand leads to the purchase of assets while the precautionary demand does not.
• C) transactions demand involves expected expenditures while the precautionary demand involves unexpected expenditures.
• D) transactions demand is for emergencies while the precautionary demand is for every day expenditures.

---

Definitions:

Monopolist

A monopolist is a sole provider of a product or service in a market, possessing significant market power to set prices above competitive levels due to lack of competition.

Perfect Competition

A market structure characterized by an infinite number of small firms, homogeneous products, free entry and exit, and perfect information, leading to firms being price takers.

MR

Short for Marginal Revenue, it refers to the increase in total revenue that results from selling one additional unit of a product or service.

MC

In economics, refers to marginal cost, which is the increase in total cost that arises from producing an additional unit of output.