A Firm That Holds Cash to Avoid Penalties Associated with the Late

question 67

Multiple Choice

A firm that holds cash to avoid penalties associated with the late payment of bills is demonstrating which type of demand for money?

• A)present value demand
• B)precautionary demand
• C)transactions demand
• D)risk- return demand
• E)speculative demand

---

Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision to pursue a certain action.

Trade Agreements Act

Legislation aimed at fostering fair and open international trade by implementing tariff concessions and other trade-related provisions.

Dumping

The practice of exporting goods at a price lower than their normal value, often with the intention of undermining local markets or competitors.

General Agreement on Tariffs and Trade

An international treaty that was aimed at reducing tariffs and other trade barriers to promote international trade; it was the precursor to the WTO.