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.
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.
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 2.3P
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