A Compensating Balance Arrangement Between a Firm and Its Bank

question 163

Multiple Choice

A compensating balance arrangement between a firm and its bank:

• A)increases the return on the loan to the bank.
• B)forces the firm to keep a minimum balance in its checking account.
• C)increases the cost of the loan to the firm.
• D)All of the above

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Definitions:

Widely Spoken Language

A language that is spoken by a large number of people across various regions or countries.

Devaluation

Reduction in a currency’s value relative to other currencies or to a fixed standard.

Imports

The act of bringing goods or services into one country from another for commercial purposes.

Domestic Buyers

Consumers or entities within a country that purchase goods and services produced in their own country.