When a bank's sources of liquidity exceed it uses of liquidity,the bank will have a:
A)positive liquidity gap.
B)negative liquidity gap.
C)cyclical liquidity gap.
D)seasonal liquidity gap.
E)None of the options is correct.

Question

Quizplus · Accepted Answer

A positive liquidity gap means that the bank has more sources of liquidity than it needs to cover its uses of liquidity. This is a desirable situation, as it provides a buffer for unexpected cash outflows or unforeseen circumstances. Banks with positive liquidity gaps are generally considered to be more stable and less risky than those with negative liquidity gaps, as they are better positioned to meet their obligations and maintain their operations even during periods of stress or volatility.

When a Bank's Sources of Liquidity Exceed It Uses of Liquidity,the