By borrowing money from many depositors and lending money to a variety of borrowers, depository institutions
A) can expose themselves to a great deal of risk.
B) spread risk efficiently.
C) decrease the quantity of money.
D) move money from M1 to M2.

Question

Quizplus · Accepted Answer

Depository institutions can spread risk efficiently by borrowing money from many depositors and lending money to a variety of borrowers. This diversification of borrowers helps reduce the overall risk of the institution.

By Borrowing Money from Many Depositors and Lending Money to a Variety