Which of the Following Statements Is True

question 8

Multiple Choice

Which of the following statements is true?

• A)An increase in the liquidation costs of non-liquid assets encourages an FI to shift more funds into more liquid, lower yielding assets.
• B)A decrease in the yield of non-liquid assets will reduce holdings of liquid assets due to higher opportunity costs of holding liquid assets.
• C)The greater the volatility of the level of deposits, the greater the optimal proportion of reserve assets held to deposits.
• D)An increase in the liquidation costs of non-liquid assets encourages an FI to reduce their holdings of more liquid, lower yielding assets.

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