Which of the Following Concepts Is Most Helpful in Explaining

question 175

Multiple Choice

Which of the following concepts is most helpful in explaining why investment increases when the interest rate falls?

• A)deadweight loss
• B)present value
• C)economic growth
• D)financial intermediation

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Definitions:

Compensating Balances

Minimum cash balances that a borrower agrees to maintain in a demand deposit account as a condition for a loan.

Transactions Balance

The amount of money held to facilitate day-to-day financial transactions, reflecting the liquidity needed for regular expenditures.

Loan Requirement

A set of criteria established by lenders that a borrower must meet to qualify for a loan.

Accruals

The accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.