Which of the Following Is True of the Baumol Model

question 12

Multiple Choice

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

• A) If the total amount of cash needed during the year increases by 20%, then C* will increase by 20%.
• B) If the average cash balance increases by 20%, then the total holding costs will increase by 20%.
• C) If the average cash balance increases by 20% the total transactions costs will increase by 20%.
• D) The optimal transfer amount is the same for all companies.
• E) If the fixed costs of selling securities or obtaining a loan (cost per transaction) increase by 20%, then C* will increase by 20%.

---

Definitions:

Lack of Motivation

A state where there is a diminished drive or enthusiasm to engage in activities, often impacting goal achievement and performance.

Motivational Counseling

A method focused on the client that aims to increase internal motivation for change by addressing and overcoming mixed feelings.

Level 1

Often represents the introductory or basic stage in a structured hierarchy or classification system.

Physical Activity

Activities that involve substantial body movements, contributing to improved physical health, which can include exercises like walking, swimming, or cycling.