In the United States, what does the general level of a family's income have to do with the amount of cash the family is likely to hold?

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Business

Nash Barber

23 May, 12:26

In the United States, what does the general level of a family's income have to do with the amount of cash the family is likely to hold?

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Mina Richard · Answer 1

The general level of family's income is directly proportional to the amount of cash a family is likely to hold

Explanation:

Of the three motives of money, transactional motives of money relates to holding money (whether at hand or at bank) to meet daily transaction e. g buying of fuel/gas, transport fare to work place.

If the level of income of a family increases, other things being equal, the family tends to hold more money for their daily transaction. The level of income is directly proportional to amount of cash a family holds ...

For example, family A earns $100 per week and holds $30 to meet daily transaction or unforeseen circumstances. If his pay increases to$150, it is intuitive for Mr A to hold higher money, lets say $50