precautionary demand for money
Precautionary Demand for Money
precautionary demand for moneythe demand for MONEY balances that are held to cover for unforeseen contingencies, for example, loss of earnings resulting from illness. The amount of money held for such purposes is broadly dependent on the level of INCOME and expenditure. The precautionary demand for money, together
with the TRANSACTIONS DEMAND FOR MONEY (that is, money held on a day-to-day basis to finance current expenditures on goods and services) and the SPECULATIVE DEMAND FOR MONEY (that is, money held to purchase BONDS in anticipation of a fall in their price) constitute the MONEY DEMAND SCHEDULE.