WAEC - Economics (2001 - No. 29)
Money is demanded for which of the following reasons?
to meet unforseen contigencies
to solve the problem of inflation
it is easily divisible
it is portable
Explication
Money held to cater for unforeseen circumstances is referred to as the precautionary demand for money. In this case, money is kept for use in a contingency. That is, people maintain sufficient cash balance to act as a cushion or buffer against unexpected events.