If a rise in short-term interest rates increases the interest a bank pays more than the interest a bank earns, then bank:
A)profits increase.
B)profits decrease.
C)assets increase.
D)assets decrease.

Question

Quizplus · Accepted Answer

When short-term interest rates increase, the interest a bank pays on deposits increases more than the interest a bank earns on its loans. This means that the bank's net interest margin (the difference between interest earned and interest paid) decreases, leading to a decrease in profits. Therefore, the correct answer is B) profits decrease.

If a Rise in Short-Term Interest Rates Increases the Interest