All Else the Same,if a Bank's Liabilities Are More Sensitive

question 60

Multiple Choice

All else the same,if a bank's liabilities are more sensitive to interest rate fluctuations than are its assets,then ________ in interest rates will ________ bank profits.

• A)an increase;increase
• B)an increase;reduce
• C)a decline;reduce
• D)a decline;not affect

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Definitions:

Interest Rate

The percentage of the principal charged by a lender for the use of its money or the rate at which interest is paid by a borrower for the use of money.

Consumes

The action of using up a good or service, typically resulting in a decrease in available quantity.

Consumption

The use of goods and services by households. It is an important component of GDP and a direct indicator of consumer spending behavior.

Income

Earnings received by a person or entity, typically through work, investments, or business ventures.