What enables banks safely to engage in both maturity transformation and risk transformation?
Answer to relevant QuestionsWhat were the causes of the credit crunch and the banking crisis of 2008?Why may an expansion of the money supply have a relatively small effect on national income? Why may any effect be hard to predict?What would cause (a) a steep ADI curve; (b) a gently sloping ADI curve? Compare the short-run and longrun effects of (i) a temporary adverse supply shock and (ii) a permanent supply reduction under each of (a) and (b).What are the mechanics whereby the central bank raises the rate of interest?What implications would a vertical short-run aggregate supply curve have for the effects of demand management policy?
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