A Disadvantage of Using Purchased Liquidity Management to Manage a FI's

question 71

Multiple Choice

A disadvantage of using purchased liquidity management to manage a FI's liquidity risk is

• A)the resulting shrinkage of the FI's balance sheet.
• B)the relatively high cost of purchased liabilities.
• C)the accessibility of international money markets.
• D)tax considerations.
• E)loss of flexibility as a result of dependence upon purchased liabilities.

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Definitions:

Budget Line

Displays combinations of products that a consumer can afford with a fixed budget, based on their prices.

Price Ratio

The relationship between the prices of two goods, indicating how many units of one good can be exchanged for one unit of the other.

Utility Ratio

The comparison of the utility (satisfaction) received from one choice relative to another.

Capital Goods

Physical assets used by businesses to produce goods and services, such as machinery, buildings, and equipment.