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JAMB Economics 2014 Question 27

Question 27

Money and Inflation

The precautionary demand for money is determined by

  1. A.the level of income.
  2. B.general price level.
  3. C.the rate of interest.
  4. D.the level of savings.
Show the answer and explanation

Answer: A (the level of income.)

Explanation

People keep money for emergencies in proportion to their income: the higher the income, the more they hold.