Suppose the bank manager wants to increase the bank's profitability.Which of the following strategies is the bank manager likely to use?

Question

Quizplus · Accepted Answer

Reducing the liquidity of a bank's assets means that the bank is holding fewer liquid assets and more long-term, higher-yielding assets, which can increase profitability. This strategy involves taking on more risk, but it can also result in higher returns on the bank's investments. Holding more assets in required reserves (A) or excess reserves (B) does not directly contribute to profitability, as reserves typically earn a low rate of return. Meeting depositors' requests for funds with little trouble (D) is simply providing good customer service and does not necessarily increase profitability.

Suppose the Bank Manager Wants to Increase the Bank's Profitability