Holding money to take care of contingencies is

Step 1: Analyze the question The question asks which motive for holding money matches "taking care of contingencies", meaning unexpected events or emergencies such as sudden illness, accidents, or urgent repairs.

Step 2: The concept: Keynes' motives for demanding money (liquidity preference)

1. Transactions motive: Holding money for planned, day-to-day spending, such as food, transport, and school fees.
2. Precautionary motive: Holding money for unforeseen events or emergencies (contingencies).
3. Speculative motive: Holding money to take advantage of future changes in interest rates or the prices of bonds and securities.

"Expansionary motive" is not one of Keynes' motives. "Expansionary" describes a type of fiscal or monetary policy, not a reason for holding money.

Step 3: Apply to the question "Contingencies" means unexpected needs. For example, a trader keeps some cash aside in case her shop needs urgent repairs or a family member suddenly falls ill. This is a precautionary motive.

• A. Speculative: wrong, this is about profiting from changes in interest rates or bond prices.
• B. Transactions: wrong, this is about expected everyday purchases.
• C. Precautionary: correct, this covers unexpected needs.
• D. Expansionary: wrong, not a motive for holding money.

Exam tip: Link the keyword to the motive:

• "Daily/routine expenses" → Transactions
• "Emergencies/contingencies/unforeseen" → Precautionary (think "precaution = prepare for trouble")
• "Bonds/interest rates/profit opportunities" → Speculative