In general,banks would prefer to meet deposit outflows by ________ rather than ________.

Question

Quizplus · Accepted Answer

Banks prefer borrowing from the Fed rather than selling loans because selling loans would decrease their asset base, which could hurt their ability to earn revenue and maintain liquidity. On the other hand, borrowing from the Fed does not impact their asset base and allows them to easily meet deposit outflows. Selling securities may also impact their asset base and potentially lead to losses if the securities are sold at a lower price than their acquisition cost. "Calling in" loans could also hurt their relationship with customers and may not be a viable option in all situations.

In General,banks Would Prefer to Meet Deposit Outflows by ________