Interest rates go down. What happens to bank income if the income gap is positive?
A) Bank income increases.
B) Bank income stays the same.
C) Bank Income decreases.
D) It's impossible to tell from the information provided.

Question

Quizplus · Accepted Answer

When interest rates go down and a bank has a positive income gap, it means that the bank's interest-sensitive assets exceed its interest-sensitive liabilities. Therefore, the bank earns less on its assets relative to what it pays on its liabilities, leading to a decrease in income.

Interest Rates Go Down