A Depository Institution Can Make Highly Illiquid and Long-Maturity Loans

question 27

Multiple Choice

A depository institution can make highly illiquid and long-maturity loans with funds obtained by issuing transaction deposits because

• A)depositors, taken as a group, behave in a predictable manner.
• B)most transaction depositors have very transaction patterns.
• C)depository institutions have a large pool of assets to draw from.
• D)depository institutions tend to be owned by individuals with a high tolerance of risk.
• E)depository institutions are skilled at evaluating credit risks.

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Definitions:

Foreign Trade

Involves the exchange of goods and services between countries, can be through importing or exporting.

Import Tariffs

Taxes imposed by a government on goods and services imported from other countries to protect domestic industries from foreign competition.

Quotas

Quotas are government-imposed trade restrictions that limit the number or monetary value of goods that can be imported or exported during a specific time period.

Politically Influential

Describes individuals or groups that hold significant power to affect public policy or government actions.