Interest rates go down. What happens to bank income if the income gap is negative?
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 the income gap is negative, it means that the bank has more rate-sensitive liabilities than rate-sensitive assets. Therefore, when interest rates go down, the bank's interest expenses decrease more than its interest income, leading to an increase in bank income.

Interest Rates Go Down