Home » Eng Finance » T » Transactions motive

Transactions motive

A motive for holding money which arises from the use of money as a medium of exchange. Since receipts and payments are rarely perfectly synchronized, an individual will generally need to hold a stock of money to meet expenditures, even when those expenditures can be perfectly foreseen. For example, one may receive a salary at the end of each month, but may make expenditures more or less continuously over the following month. So a steadily dwindling stock of money must be held to make these transactions. lf, on the other hand, all expenditures were made simultaneously with receipts, there would be no need to hold such a money balance.

Reference: The Penguin Dictionary of Economics, 3rd edt.