Why Have Opportunity Costs of Maintaining Cash Balances Decreased in Importance

question 7

Multiple Choice

Why have opportunity costs of maintaining cash balances decreased in importance in recent years?

• A)Lower interest rates have reduced the opportunity costs associated with maintaining cash balances.
• B)Most banks allow firms to move cash in and out of interest-bearing accounts easily and cheaply.
• C)More competition among banks has lowered the opportunity costs that arise from maintaining cash balances.
• D)Firms are earning higher profits,so opportunity costs have become smaller relative to those profits.

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