Crystal owns a bookstore. A period of economic turmoil adds a great deal of uncertainty to her sales forecasts. She decides to hold additional funds in the store's account to guard against the possibility of lower-than-expected sales. This is an example of an increase in Crystal's demand for money. True or false?

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Business

Tristan Ellis

18 April, 11:57

Crystal owns a bookstore. A period of economic turmoil adds a great deal of uncertainty to her sales forecasts. She decides to hold additional funds in the store's account to guard against the possibility of lower-than-expected sales. This is an example of an increase in Crystal's demand for money. True or false?

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Hoffman · Answer 1

True

Explanation:

In monetary economics, the demand for money is the total amount of the asset an individual prefer to keep in liquid or near liquid forms rather than investment. Some of the factors that influences the demand for money are interest rate, inflation, income, e. t. c.

John Maynard Keynes postulated that the demand for money falls within the realms of liquidity preference, which he summarized under three headings, these are, the transactions motives, the precautionary motives, and the speculative motives.