Which One of the Following Statements Is Correct Concerning a Motive

question 84

Multiple Choice

Which one of the following statements is correct concerning a motive for maintaining liquidity?

• A) Firms should maintain compensating balances just in case they encounter an emergency situation.
• B) Firms need to hold cash as a buffer between inflowing and outflowing transactions.
• C) International firms have a transactional motive to hold cash in case favorable exchange rates become available.
• D) Firms need to hold cash for precautionary motives especially since money market accounts are not very liquid.
• E) The increasing use of electronic funds transfers is increasing the transactional motive to hold cash.

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Definitions:

Mechanized Transportation

The use of machinery, such as cars, trains, and airplanes, to move goods and people over distances, significantly increasing efficiency and speed compared to traditional methods.

Buggy Whips

A product or service that has become obsolete due to technological advancements or changes in consumer preferences.

Demand

The interest and capacity of buyers to acquire a product or service for a certain cost.

Human Capital

The abilities, understanding, and expertise held by a person or a group, considered in terms of their economic or value worth to a company or nation.