Assume that Bank of America quotes you a buy rate of $1.95 per pound and a sell rate of $1.98 per pound.If you buy 1,000 pounds from Bank of America,the bank will have too few pounds.To "square off," Bank of America has to ________ the buy rate and ______ the sell rate.

Question

Quizplus · Accepted Answer

To square off and balance the demand for pounds, the bank would need to make buying pounds less attractive and selling pounds more attractive. This is achieved by raising both the buy and sell rates. Raising the buy rate makes it more expensive for customers to buy pounds, potentially reducing demand, while raising the sell rate offers a better price for selling pounds to the bank, potentially increasing supply.

Assume That Bank of America Quotes You a Buy Rate