1. The Transaction Motive
A certain amount of money is needed for everyday requirements, the purchase of food and clothing
and other ordinary expenses. How much is necessary to hold for these purposes will depend on 3
factors.
a) A person?s income
b) The interval between one pay-day and the next
c) Habit
Generally the higher the income the more money will be held. The weekly wage-earner will need to hold less
than a person who receives his salary monthly, for in the first case, sufficient amount has to be held to cover
expenses for only one week, whereas the other man has to make provision for four weeks
2.The Precautionary Motive
People hold money in reserve to cover unanticipated contingencies which might arise in the period or sudden
purchase of opportune advantage. The amount held will depend mainly on the outlook of the
individual,how optimistic he is both as regards events and the possibility of borrowing at short notice
should the need arise. But, taking the community as a whole, the amount set aside for the precautionary
motive is, in normal times, likely to be tied fairly closely to the level of national income.
3. The Speculative Motive
Another major reason for holding money is in order to speculate on the course of future events. If one thinks
prices are now very low and will soon rise, the tendency is to buy now and to put off selling until prices rise.
If one thinks prices are high now and will soon fall, the tendency is to sell now and to postpone buying until
prices have fallen.
This emphasizes the role of money as a store of wealth. Speculative Balances are wealth held in the form of
money rather than interest earning assets because of expectations that the prices of those assets may change.
Wilfykil answered the question on February 6, 2019 at 11:09
-
Define Money and outline its major functions.
(Solved)
Define Money and outline its major functions.
Date posted:
February 6, 2019
.
Answers (1)
-
Assume the following information represents the National Income Model of an "Utopian" economy.Y = C + I + GC = a + b(Y – T)T...
(Solved)
Assume the following information represents the National Income Model of an „Utopian? economy.
Y = C + I + G
C = a + b(Y – T)
T = d + tY
I = IO
G = GO
Where a > O; O < b < 1
d > O; O < t < 1
T = Taxes
I = Investment
G = Government Expenditure
Find the equilibrium values of income, consumption and taxes.
Date posted:
February 6, 2019
.
Answers (1)
-
The total cost equation in the production of bacon at some hypothetical factory is
C = 1000 + 100Q – 15Q2 + Q3
Where C = Cost...
(Solved)
The total cost equation in the production of bacon at some hypothetical factory is
C = 1000 + 100Q – 15Q2 + Q3
Where C = Cost measured in shillings, while Q = quantity measured in kilograms
What is the Marginal cost of the 12th Kilogram?
Date posted:
February 6, 2019
.
Answers (1)
-
The total cost equation in the production of bacon at some hypothetical factory is
C = 1000 + 100Q – 15Q2 + Q3
Where C = Cost...
(Solved)
The total cost equation in the production of bacon at some hypothetical factory is
C = 1000 + 100Q – 15Q2 + Q3
Where C = Cost measured in shillings, while Q = quantity measured in kilograms.
Compute the total and average costs at output level of 10 and 11 kilograms.
Date posted:
February 6, 2019
.
Answers (1)
-
Briefly explain and illustrate quasi-rent.
(Solved)
Briefly explain and illustrate quasi-rent.
Date posted:
February 6, 2019
.
Answers (1)
-
Using well labelled diagrams, illustrate cases when the total factor payments may equal to economic rent,
or transfer earnings or shared between the two.
(Solved)
Using well labelled diagrams, illustrate cases when the total factor payments may equal to economic rent,
or transfer earnings or shared between the two.
Date posted:
February 6, 2019
.
Answers (1)
-
Explain what is meant by the terms transfer earnings and economic rent of a factor of production
(Solved)
Explain what is meant by the terms transfer earnings and economic rent of a factor of production
Date posted:
February 6, 2019
.
Answers (1)
-
A monopoly firm is faced with the following demand function
P = 13 – 0.5Q
The Marginal Cost function for the firm is given by 3 +...
(Solved)
A monopoly firm is faced with the following demand function
P = 13 – 0.5Q
The Marginal Cost function for the firm is given by 3 + 4Q and the total fixed cost is 4.
Determine the output level at the break-even point.
Date posted:
February 6, 2019
.
Answers (1)
-
A monopoly firm is faced with the following demand function
P = 13 – 0.5Q
The Marginal Cost function for the firm is given by 3 +...
(Solved)
A monopoly firm is faced with the following demand function
P = 13 – 0.5Q
The Marginal Cost function for the firm is given by 3 + 4Q and the total fixed cost is 4.
Determine the level of super-normal profit if any.
Date posted:
February 6, 2019
.
Answers (1)
-
Illustrate and explain the short-run supply curve of a firm in perfect competition
(Solved)
Illustrate and explain the short-run supply curve of a firm in perfect competition
Date posted:
February 6, 2019
.
Answers (1)
-
Explain why a firm in perfect competition may continue in the production of goods which it
can only sell at a loss and why it cannot...
(Solved)
Explain why a firm in perfect competition may continue in the production of goods which it
can only sell at a loss and why it cannot continue doing this indefinitely
Date posted:
February 6, 2019
.
Answers (1)
-
Write explanatory notes on the various types of internal and external economies of scale.
(Solved)
Write explanatory notes on the various types of internal and external economies of scale.
Date posted:
February 6, 2019
.
Answers (1)
-
Using a well-illustrated diagram, show that a monopolist can make losses in the short-run even
when MC = MR
(Solved)
Using a well-illustrated diagram, show that a monopolist can make losses in the short-run even
when MC = MR
Date posted:
February 6, 2019
.
Answers (1)
-
Using a well illustrated diagram, explain why prices are "sticky" downwards under an
oligopolistic market structure
(Solved)
Using a well illustrated diagram, explain why prices are "sticky" downwards under an
oligopolistic market structure
Date posted:
February 6, 2019
.
Answers (1)
-
Explain the meaning of mobility of factors of production. To what extent are factors of
production mobile?
(Solved)
Explain the meaning of mobility of factors of production. To what extent are factors of
production mobile
Date posted:
February 6, 2019
.
Answers (1)
-
If Mrs. Breader views butter and margarine as perfect substitutes, draw a set of indifference
curves that describe her preference for these two commodities
(Solved)
If Mrs. Breader views butter and margarine as perfect substitutes, draw a set of indifference
curves that describe her preference for these two commodities
Date posted:
February 6, 2019
.
Answers (1)
-
Explain any four uses of indifference curve analysis
(Solved)
Explain any four uses of indifference curve analysis
Date posted:
February 6, 2019
.
Answers (1)
-
Briefly explain two exceptions to the definition of an indifference curve.
(Solved)
Briefly explain two exceptions to the definition of an indifference curve.
Date posted:
February 6, 2019
.
Answers (1)
-
Explain the main characteristics of indifference curves
(Solved)
Explain the main characteristics of indifference curves
Date posted:
February 6, 2019
.
Answers (1)
-
Illustrate and explain Consumer equilibrium under the ordinalist approach
(Solved)
Illustrate and explain Consumer equilibrium under the ordinalist approach
Date posted:
February 6, 2019
.
Answers (1)