When households and businesses substitute Treasury bills, commercial paper, and repurchase agreements for short-term bank deposits in their portfolios, they are

Question

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Treasury bills, commercial paper, and repurchase agreements typically offer higher returns than short-term bank deposits but are less liquid, meaning they can be harder to convert to cash quickly without loss. Therefore, by choosing these options, households and businesses are sacrificing liquidity for a potentially higher return.

When Households and Businesses Substitute Treasury Bills, Commercial Paper, and Repurchase