Depository institution create liquidity when they
A) have liabilities that are illiquid.
B) buy assets that are liquid.
C) borrow short and lend long.
D) borrow long and lend short.

Question

Quizplus · Accepted Answer

Depository institutions create liquidity by borrowing short-term funds and lending them out as long-term loans, thus transforming short-term liabilities into long-term assets.

Depository Institution Create Liquidity When They