Solution

It is the sum of money required for carrying out daily transactions. It is also known as the sum that each person sets up to cover future expenses. There are two reasons to keep transaction money on hand. The need for income is for people who wish to cover home expenses, and the desire for business is for people who require money to operate their businesses.

The following chart shows the relationship between transaction demand and transaction value:
Where
V = 1/K which represents velocity of circulation of money
T= Total transaction value over time in an economy
K = A positive fraction
MTD = Money stock that people were willing to hold at a time