Which of the following motives were articulated by J. M. Keynes for holding cash?

A. Precautionary

B. Return generation

C. Speculative

D. Investment 

E. Transaction

Choose the correct answer from the options given below: 

The correct answer is A, C and E only.

Key PointsThe correct answer is A, C, and E only.

John Maynard Keynes proposed four motives for holding cash in his book "The General Theory of Employment, Interest, and Money". These motives are:

• Transaction motive: People hold cash to meet their day-to-day expenses. This is the most common motive for holding cash.
• Precautionary motive: People hold cash to guard against unexpected expenses or emergencies.
• Speculative motive: People hold cash to take advantage of investment opportunities.
• Finance motive: People hold cash to make future payments, such as taxes or loan repayments.

However, the finance motive is not widely accepted by economists today. They argue that people can use other assets, such as bonds, to meet their future payment needs.

Important Points So, the three motives that are still widely accepted are the transaction motive, the precautionary motive, and the speculative motive.

• The transaction motive is the most important motive for holding cash. It is determined by the level of economic activity. When economic activity is high, people need to hold more cash to meet their day-to-day expenses.
• The precautionary motive is determined by the level of uncertainty in the economy. When people are more uncertain about the future, they are more likely to hold more cash to guard against unexpected expenses.
• The speculative motive is determined by the expected return on alternative investments. When the expected return on alternative investments is low, people are more likely to hold more cash in anticipation of higher returns in the future