QUESTION 4You are the bank's liquidity manager. What should you do if borrowed liquidity becomes cheaper and why? Answer this questionby filling in the blanks. Please use the suitable word provided in the round brackets.The risk of illiquidity(increased/decreased/did not change). The cost of illiquidity(increased/decreased/did not change). Therefore it makes sense to(increase/decrease/ maintain) the ESF buffer. As a result your bank will provide(more/less/the same)liquidity transformation for society.

The rate of interest decreases whenever the borrowed liquidity becomes cheaper.

Answered: You are the bank's liquidity manager.…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 13P

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