Demand for money theories describe various functions of money. Transaction theory of money explains money as the medium of exchange. Portfolio theories of money elucidate the function of money as store of value.
Theories of money demand that emphasis the role of money as the medium of exchange are called transaction theory. According to this hypothesis we hold money to purchase goods and services which means that money is demanded for transaction purposes. The most important transaction theory of money is Bamoul Model of Cash Management.
