(a) Money is anything that is generally acceptable in a given community as a means of payment for goods and services and for the settlement of debts.
(b) The three motives for holding money are:
(i) Transactions motive: a certain amount is kept in hand for daily requirements such as for food, transport, etc.
(ii) Precautionary motive: Consumers sometimes hold cash in reserve in case an unexpected payment has to be made e.g. medical expenses.
(iii) Speculative motive: Holding money to take advantage of investment opportunities in securities e.g. bonds and shares.
(c) Determinants of the motives are:Transactions motive:
(i) size of income
(ii) interval between wage payments.
(iii) availability of credit.
(iv) family size.
(v) the rate of interest.
(vi) the status/life style.
(vii) the general price level.Precautionary motive:
(i) size of income
(ii) interval between wage payments.
(iii) availability of credit.
(iv) family size.
(v) the rate of interest.
(vii) perception of risk.
(vii) availability of social insurance.Speculative motive:
(i) the rate of interest
(ii) the degree of risk aversion