A Bank's Net Worth Will Decline Following an Increase in Interest

question 72

Multiple Choice

A bank's net worth will decline following an increase in interest rates if the value of its

• A)fixed-rate assets is greater than the value of its fixed-rate liabilities.
• B)fixed-rate assets is less than the value of its fixed-rate liabilities.
• C)fixed-rate assets is greater than the value of its variable-rate assets.
• D)fixed-rate liabilities is greater than the value of its variable-rate liabilities.

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Definitions:

Government Revenue

The money received by a government from taxes and non-tax sources to enable it to undertake government expenditures.

Perfectly Inelastic

A situation in which the quantity demanded or supplied of a good does not change regardless of changes in its price.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Price Elasticity

A gauge for understanding the degree to which the demand for a product changes in response to its price fluctuation.