Which of the following statements is true?
A)A positive financing gap means that the FI must fund it by using its cash and liquid assets or by raising funds in the money market.
B)A negative financing gap means that the FI must fund it by using its cash and liquid assets or by raising funds in the money market.
C)A positive financing gap means that the FI has excess liquidity.
D)A negative financing gap means that the FI is in need of liquidity.

Question

Quizplus · Accepted Answer

A positive financing gap means that the FI has a shortfall of funds, which must be financed by using its cash and liquid assets or by raising funds in the money market. This is because a positive financing gap indicates that the FI's liabilities are greater than its assets, resulting in a need for additional funding. Conversely, a negative financing gap indicates that the FI has excess funds that can be invested or used to repay debt. Therefore, statement B, C, and D are all incorrect.

Which of the Following Statements Is True