What enables banks safely to engage in both maturity transformation and risk transformation?
Answer to relevant QuestionsWhy do banks hold a range of assets of varying degrees of liquidity and profitability?What effects will the following have on the equilibrium rate of interest? (You should consider which way the demand and/or supply curves of money shift.)(a) Banks find that they have a higher liquidity ratio than they ...Under what circumstances will (a) A rise in investment and (b) A rise in money supply cause a large rise in national income?Why is it difficult to use fiscal policy to ‘fine tune’ the economy?What is the difference between adaptive expectations and rational expectations?
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