CH. 15 INCENTIVES TO LIQUIDITY 195

business-deposits, and savings-deposits, and I need notrepeat here the analysis which I gave in Chapter 3 ofthat book. Money held for each of the three purposesforms, nevertheless, a single pool, which the holder isunder no necessity to segregate into three water-tightcompartments; for they need not be sharply dividedeven in his own mind, and the same sum can be heldprimarily for one purpose and secondarily for another.Thus we can—equally well, and, perhaps, better—consider the individual’s aggregate demand for moneyin given circumstances as a single decision, though thecomposite result of a number of different motives.

In analysing the motives, however, it is still con-venient to classify them under certain headings, thefirst of which broadly corresponds to the former classi-fication of income-deposits and business-deposits, andthe two latter to that of savings-deposits. These Ihave briefly introduced in Chapter 13 under the head-ings of the transactions-motive, which can be furtherclassified as the income-motive and the business-motive, the precautionary-motive and the speculative-motive.

(i) The Income-motive.—One reason for holdingcash is to bridge the interval between the receipt ofincome and its disbursement. The strength of thismotive in inducing a decision to hold a given aggregateof cash will chiefly depend on the amount of income andthe normal length of the interval between its receiptand its disbursement. It is in this connection that theconcept of the income-velocity of money is strictlyappropriate.

(ii) The Business-motive.—Similarly, cash is held tobridge the interval between the time of incurringbusiness costs and that of the receipt of the sale-proceeds; cash held by dealers to bridge the intervalbetween purchase and realisation being included underthis heading. The strength of this demand will chieflydepend on the value of current output (and hence on