A Gap Ratio of Less Than 1

question 4

Multiple Choice

A gap ratio of less than 1.00 suggests that

• A)rate-sensitive assets exceed rate-sensitive liabilities.
• B)an increase in interest rates would increase the bank's net interest margin.
• C)rate-sensitive liabilities exceed rate-sensitive assets.
• D)a decrease in interest rates would decrease the bank's net interest margin.
• E)an increase in interest rates would increase the bank's net interest margin AND a decrease in interest rates would decrease the bank's net interest margin.

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Definitions:

Marginal Product

The extra output or benefit received from using one additional unit of a resource.

Factor X

A term used to denote an unknown or unspecified factor in various contexts, such as productivity, growth, or other economic models.

Perfect Substitutes

Goods that can be completely replaced by another with no loss of utility to the consumer.

Inputs

The resources such as labor, materials, and capital, that are used in the production process to produce goods and services.