A Compensating Balance Requirement Means That a Lending Institution Will

question 17

True/False

A compensating balance requirement means that a lending institution will require a borrowing company to keep a certain percentage of the loaned amount on deposit with that institution.

---

Definitions:

Comparative Advantage

A principle in international trade that suggests a country or entity should produce and export goods and services for which it has a lower opportunity cost compared to other countries or entities.

Autarky Price

The price of a good or service in a closed economy with no international trade, set by the balance of domestic supply and demand.

World Price

The international market price of a good or service, influenced by global supply and demand conditions.

Domestic Quantity

The total amount of a goods or services produced and consumed within a country's borders.