Q.What are the motives of demand for money ?

Keynes's liquidity-preference theory identifies three motives for holding money: the transactions motive, the precautionary motive and the speculative motive.

In the Tamil Nadu HSC Class-11 Economics syllabus, the demand for money is explained by Keynes through the idea of liquidity preference — the desire of people to hold wealth in the form of cash. There are three motives:

1. Transactions motive. People and businesses hold money to meet their regular, day-to-day payments (buying goods, paying wages, meeting business expenses). The amount held depends mainly on the level of income.
2. Precautionary motive. Money is held as a reserve to meet unforeseen or emergency needs such as illness, accidents or sudden expenses. This too depends on income. …