Depository institution create liquidity when they
A) buy assets that are liquid.
B) have liabilities that are illiquid.
C) borrow long and lend short.
D) borrow short and lend long.

Question

Quizplus · Accepted Answer

Depository institutions create liquidity by borrowing short-term (short) and lending long-term (long), which allows them to transform short-term liabilities into long-term assets.

Depository Institution Create Liquidity When They