Money Held for Precautionary Reasons Is Included in the Demand

question 15

Multiple Choice

Money held for precautionary reasons is included in the demand for money:

• A) as a third, separate category called the precautionary demand for money.
• B) as part of transactions demand.
• C) as part of portfolio demand.
• D) partly as transactions demand and partly as portfolio demand.

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Definitions:

Present Value

The current value of future cash flows discounted at the appropriate discount rate, reflecting the time value of money.

Annual Payment

A payment made once a year for services, subscriptions, or obligations - often used in the context of loans, leases, and insurance premiums.

Tax Deductible

Expenses or payments that can be subtracted from gross income to reduce the amount of income subject to tax.

Bonds

Long-term securities issued by corporations, municipalities, or governments to raise funds, paying interest to holders.