How do banks create liquidity?
What will be an ideal response?
Banks create liquidity because they accept short-term deposits and make long-term loans. The short-term deposits can be quickly and easily changed into money—indeed, some of the deposits are money itself! In exchange, the bank makes long-term loans that cannot be converted to money until their due date is reached.
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At what level of output will average variable cost equal average total cost?
a. when marginal cost equals average total cost b. for all levels of output in which average variable cost is falling c. when marginal cost equals average variable cost d. There is no level of output where this occurs, as long as fixed costs are positive.
Who of the following has been prominently accused of acting on the basis of the “edifice complex”?
A. The Environmental Protection Agency B. A. C. Pigou C. The Army Corps of Engineers D. Environmental activists
Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. If the cost to Alex of searching for an apartment is $30, then searching for another apartment is a gamble with an expected value of:
A. $20. B. $40. C. $0. D. $10.
Refer to Figure 22.3 for a perfectly competitive firm. Which of the following statements is true for this firm between the prices of $10 and $15?
A. The firm is experiencing economic losses but should continue to produce. B. The firm is experiencing economic losses and should shut down. C. The firm is experiencing zero economic profits. D. The firm is experiencing economic profits because the market price is greater than or equal to the minimum AVC.