Reading 24: Money, the Price Level, and Inflation - LOS c, recent, black, style

mayanfang1

Q1.  recent staff meeting of Economic Advisers Inc., a think-tank located in Washington, DC, Mitchell Jung made the following statements regarding the main economic functions of depository institutions.

Statement 1: One of the main economic functions of depository institutions is to act as financial intermediaries. By doing so, they lower the borrowers’ cost of funds from what it would otherwise be if borrowers had to seek out individuals willing to lend.

Statement 2: Depository institutions create liquidity by using loans they take in to have funds available to pay interest on short-term deposits.

Are Statement 1 and Statement 2 as made by Jung CORRECT?

        Statement 1                  Statement 2

 

A) Incorrect                         Incorrect

B) Correct                           Correct

C) Correct                           Incorrect

Q2. h of the following is the primary income-earning asset of commercial banks?

A)  Demand deposits.

B)  Time deposits.

C)  Loans outstanding.

nattoise

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