Which of the following allow banks to minimize the cost to a business of borrowing?
I. Borrowing long and lending short.
II. Raising funds from a large number of depositors.
III. Creating money by lending all their reserves.
A) II and III
B) I only
C) II only
D) I and III

Question

Quizplus · Accepted Answer

Option II is the correct choice as it allows banks to raise funds from a large number of depositors, enabling them to lend to businesses at a lower cost. Option I (borrowing long and lending short) may not necessarily minimize the cost to a business of borrowing, and Option III (creating money by lending all their reserves) is not a recommended practice as it can lead to inflation.

Which of the Following Allow Banks to Minimize the Cost