Which of the following is a motive for holding money?

1. Analyze the question The question asks which option is a motive for holding money. This points to Keynes's liquidity preference theory, which gives three motives for holding money.

2. Explain the concept According to Keynes, people hold money for three reasons:

• Transactions motive: to meet day-to-day spending needs such as food, transport and bills.
• Precautionary motive: to cover unexpected expenses such as sickness or emergencies.
• Speculative motive: to take advantage of future changes in interest rates or the prices of bonds and other assets.

3. Work through the options

• A. Celebration: This is an occasion for spending. It is not a recognised economic motive.
• B. Daily purchases: This is the textbook example of the transactions motive, which is money held for regular, routine spending.
• C. Election campaign: This is a political activity, not an economic motive.
• D. Payment of taxes: This is an occasional obligation. It can be loosely linked to transactions, but it is not the standard example. Daily purchases fit the transactions motive much better.

4. Answer The correct option is **B. It is the transactions motive for holding money.

5. Exam tip Remember the three motives as T-P-S: Transactions, Precautionary, Speculative. If an option describes routine, day-to-day spending, it is the transactions motive. If it describes emergencies, it is precautionary. If it describes investment gambles, it is speculative.