Which of the Following Is True of the Baumol Model

question 6

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) The optimal transfer amount is the same for all companies.

---

Definitions:

Medical Event

An incident or occurrence related to the health or medical condition of an individual, which can range from diagnosis and treatment to recovery.

Hardships

Difficult or unpleasant conditions or experiences that are often challenging to overcome.

Lesbians with Children

Female same-sex couples or homosexual women who are raising children together, either biologically from one partner, through adoption, or surrogacy.

Adolescent Motherhood

The state or experience of being a mother during the teenage years, which can entail unique social, economic, and health challenges.