Transactions Demand for Money:

The Transactions Demand for Money: Money is needed to carry out day-to- day transactions due to the discrepancies between receipts of income (say once in a week or a month) and the expenditures of a person. This demand for money is called the transactions demand for money (M_d). An individual with higher level of income has a greater demand of goods and services, in general, than an individual with a lower level of income making M^d_t directly related to the level of income (Y). 

The Classical economists agreed with this and emphasised the role of money as the medium of exchange. However, the  precautionary and the 'speculative' demand for money are the Keynes' additional sources of 'liquidity preference', (or demand for
money).

For simplicity, we can say that transactionary demand for money, is a constant proportion, k, of the level of national income, Y