The Baumol-Tobin Analysis Suggests That an Increase in the Brokerage

question 21

Multiple Choice

The Baumol-Tobin analysis suggests that an increase in the brokerage fee for buying and selling bonds will cause the demand for money to ________ and the demand for bonds to ________.

• A)increase;increase
• B)increase;decrease
• C)decrease;increase
• D)decrease;decrease

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Definitions:

Accounts Payable Balance

The amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Sales

The exchange of goods or services for money, representing the primary revenue source for most businesses.

COGS

Stands for Cost of Goods Sold; it's the direct cost attributable to the production of the goods sold by a company, including both raw materials and labor costs.

Compensating Balance

A minimum bank account balance a borrower must maintain as part of a loan agreement.