QUESTION 3 One view of the role of Banks is that they create liquidity. What does this liquidity creation involve? Turning hard cash into soft electronic money, such as bank account balances. Turning depositors cash into easy-to-use deposit accounts. Turning information-sensitive long-term loans into information-insensitive short-term deposits. Turning solid assets like houses into liquid assets like securitized mortgages.

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 2.3P
icon
Related questions
Question
QUESTION 3
One view of the role of Banks is that they create liquidity. What does this liquidity creation involve?
Turning hard cash into soft electronic money, such as bank account balances.
Turning depositors cash into easy-to-use deposit accounts.
Turning information-sensitive long-term loans into information-insensitive short-term deposits.
Turning solid assets like houses into liquid assets like securitized mortgages.
Transcribed Image Text:QUESTION 3 One view of the role of Banks is that they create liquidity. What does this liquidity creation involve? Turning hard cash into soft electronic money, such as bank account balances. Turning depositors cash into easy-to-use deposit accounts. Turning information-sensitive long-term loans into information-insensitive short-term deposits. Turning solid assets like houses into liquid assets like securitized mortgages.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Assets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ECON MACRO
ECON MACRO
Economics
ISBN:
9781337000529
Author:
William A. McEachern
Publisher:
Cengage Learning
MACROECONOMICS FOR TODAY
MACROECONOMICS FOR TODAY
Economics
ISBN:
9781337613057
Author:
Tucker
Publisher:
CENGAGE L
Economics For Today
Economics For Today
Economics
ISBN:
9781337613040
Author:
Tucker
Publisher:
Cengage Learning
Survey Of Economics
Survey Of Economics
Economics
ISBN:
9781337111522
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc