Which of the Following Is True of the Baumol Model

question 20

Multiple Choice

Which of the following is true of the Baumol model? Note that the optimal cash transfer amount is C*?

• A) If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by 20%, then C* will increase by 20%
• B) If the total amount of cash needed during the year increases by 20%, then C* will increase by 20%.
• C) If the average cash balance increases by 20%, then the total holding costs will increase by 20%.
• D) If the average cash balance increases by 20% the total transactions costs will increase by 20%.
• E) None of the above is true.

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Definitions:

Ventral

Pertaining to the front or anterior of the body; opposite of dorsal.

Primary Bronchi

The major air passages that branch off directly from the trachea into each lung.

Larynx

A complex structure in the neck involved in breathing, producing sound, and protecting the trachea against food aspiration.

Esophagus

The muscular tube that connects the throat (pharynx) with the stomach, allowing for the passage of food.