In Order to Achieve a More Stable Revenue Stream in a Merger

question 151

True/False

In order to achieve a more stable revenue stream in a merger, the asset and liability portfolios of the two institutions should have similar credit, interest rate, and liquidity characteristics.

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Definitions:

Inflation Rate

The rate at which the overall price level of goods and services increases, thereby reducing the buying power.

Nominal Wage Rates

The amount of money paid to an employee by an employer in current prices, without adjusting for inflation.

Real Wages

Wages or salaries adjusted for inflation, reflecting the true purchasing power of income.

Potential Output

The economy’s maximum sustainable output, given the supply of resources, technology, and rules of the game; the output level when there are no surprises about the price level.