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JAMB Economics 2005 Question 11

Question 11

Money and Inflation

Idle cash balances are held for

  1. A.planned purchases
  2. B.the purchase of bonds
  3. C.the purchase of shares
  4. D.unplanned purchases
Show the answer and explanation

Answer: B (the purchase of bonds)

Explanation

Idle balances are money held for the speculative motive: waiting to buy bonds when their prices fall (interest rates rise).