196 THE GENERAL THEORY OF EMPLOYMENT BK. IV

current income), and on the number of hands throughwhich output passes.

(iii) The Precautionary-motive .—To provide for con-tingencies requiring sudden expenditure and for un-foreseen opportunities of advantageous purchases, andalso to hold an asset of which the value is fixed in termsof money to meet a subsequent liability fixed in termsof money, are further motives for holding cash.

The strength of all these three types of motive willpartly depend on the cheapness and the reliability ofmethods of obtaining cash, when it is required, bysome form of temporary borrowing, in particular byoverdraft or its equivalent. For there is no necessity tohold idle cash to bridge over intervals if it can beobtained without difficulty at the moment when it isactually required. Their strength will also depend onwhat we may term the relative cost of holding cash. Ifthe cash can only be retained by forgoing the purchase ofa profitable asset, this increases the cost and thus weakensthe motive towards holding a given amount of cash.If deposit interest is earned or if bank charges areavoided by holding cash, this decreases the cost andstrengthens the motive. It may be, however, that thisis likely to be a minor factor except where large changesin the cost of holding cash are in question.

(iv) There remains the Speculative-motive .—Thisneeds a more detailed examination than the others,both because it is less well understood and because itis particularly important in transmitting the effects ofa change in the quantity of money.

In normal circumstances the amount of moneyrequired to satisfy the transactions-motive and theprecautionary-motive is mainly a resultant of thegeneral activity of the economic system and of thelevel of money-income. But it is by playing on thespeculative-motive that monetary management (or, inthe absence of management, chance changes in thequantity of money) is brought to bear on the economic