Which One of the Following Best Represents the Transaction Motive

question 22

Multiple Choice

Which one of the following best represents the transaction motive for holding cash?

• A)Buying extra inventory in response to an unexpected sale offered by a supplier
• B)Distributing the weekly paychecks
• C)Increasing the minimum cash balance for the firm's main bank account
• D)Unexpectedly purchasing a competitor's firm
• E)Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep rising

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Definitions:

Two-Thirds Majority Vote

A voting requirement where at least two-thirds of the members present must agree for a proposal to pass, often used for significant decisions.

Transfer Payments

Payments made by the government to individuals for which no goods or services are provided in return, such as welfare benefits.

Budget Deficit

The situation where a government's expenditures surpass its revenue over a specific period, leading to borrowing or debt accumulation.

Government Purchases

Expenditures by government entities on goods and services that directly absorb resources and are part of the nation's gross domestic product (GDP).