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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Definitions:

Autonomic

Pertaining to the autonomic nervous system, which regulates involuntary bodily functions such as heart rate and digestion.

Blood Vessel

Tubular structures carrying blood through the tissues and organs; a vein, artery, or capillary.

Constrict

To constrict means to narrow or become tighter, often referring to the reduction in diameter of blood vessels or other tubular structures in the body.

Splanchnic Nerve

Nerves that innervate the viscera, transmitting information to and from the visceral organs to the central nervous system.