An expected increase in interest rate would indicate a move towards _______________income gap to increase future bank income.
A) neutral
B) negative
C) positive
D) zero

Question

Quizplus · Accepted Answer

An expected increase in interest rate would indicate a move towards a positive income gap to increase future bank income. This is because a positive income gap implies that a bank's interest-sensitive assets exceed its interest-sensitive liabilities, so when interest rates rise, the bank's income from assets increases more than its expenses on liabilities, leading to higher overall income.

An Expected Increase in Interest Rate Would Indicate a Move