Depository Institution Create Liquidity When They

question 332

Multiple Choice

Depository institution create liquidity when they

• A) buy assets that are liquid.
• B) borrow short and lend long.
• C) have liabilities that are illiquid.
• D) borrow long and lend short.

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Definitions:

Consolidation

Consolidation refers to the process of combining assets, liabilities, and other financial items of two or more entities into one.

Autonomy

The capacity to make decisions and act independently, free from external control or influence.

Legal Systems

The comprehensive framework of rules and institutions within a society that governs the conduct of its members and the resolution of disputes.

External Environments

The external factors, conditions, and forces outside an organization that can affect its activities and performance, including economic, legal, and technological influences.