Financial Intermediaries, Through Their Ability to Lower Transaction Costs

question 61

Multiple Choice

Financial intermediaries, through their ability to lower transaction costs:

• A) reduce the opportunity cost of specialization.
• B) decrease the efficiency of an economy.
• C) allow for people to be more self-sufficient.
• D) make collecting and processing information unprofitable.

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Definitions:

Miller-Orr Model

A financial model used to manage cash flow and determine optimal cash reserves for a company.

Optimal Upper Cash Limit

The maximum amount of cash a company determines is efficient to hold in reserve for covering transaction costs and contingencies.

Disbursements

Payments made by a business, often involving the outflow of cash for expenses or investments.

Weekly Interest Rate

The interest rate applied to a loan or savings, calculated and compounded on a weekly basis.