An Example of an Economic Assumption Would Be

question 22

Multiple Choice

An example of an economic assumption would be:

• A) growth in sales.
• B) growth in the capital spending requirement.
• C) a plug variable.
• D) change in interest rates.
• E) growth in dividends.

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Definitions:

Transaction Motive

The need to hold cash to satisfy normal disbursement and collection activities associated with a firm’s ongoing operations.

Liquidity

Measures the ease with which an asset can be converted into cash without significantly affecting its price.

Speculative Motive

The need to hold cash to take advantage of additional investment opportunities, such as bargain purchases.

Liquidity

The ability of an asset to be converted into cash quickly and without any significant loss in value.