State and explain the three motives put forward by John Maynard Keynes for holding assets in the form of cash - Leaving Cert Economics - Question e - 2015

John Maynard Keynes identified three primary motives for holding cash:

1. Transactionary Motive
   This motive refers to the desire to hold money for day-to-day spending and as a means of exchange. People require cash to facilitate daily transactions, ensuring they can purchase goods and services as needed.

   • Influence: The level of income influences this motive. Individuals with higher incomes tend to spend more, leading to an increased transactionary demand for money.

2. Precautionary Motive
   This involves holding cash for emergencies or unexpected expenses. Individuals save money to provide a financial buffer for unforeseen circumstances, such as medical emergencies or urgent home repairs.

   • Influence: The level of income also plays a role here. As income increases, the precautionary demand for money tends to rise, as individuals feel more secure and are able to save more for potential emergencies.

3. Speculative Motive
   This motive pertains to the desire to hold cash in anticipation of future investment opportunities. Individuals seek to hold money to avoid potential losses from not taking advantage of profitable investment options. When the rate of interest is low, holding cash may be preferable to investing it in bonds or other interest-earning assets.

   • Influence: Interest rates are a crucial factor influencing this motive. A low-interest environment leads individuals to hold cash to seize future investment opportunities, whereas high rates may encourage investment in interest-bearing assets.