Which of the following allow banks to minimize the cost to a business of borrowing?
I. Borrowing long and lending short.
II. Raising funds from a large number of depositors.
III. Creating money by lending all their reserves.
A) I and III
B) II only
C) I only
D) II and III

Question

Quizplus · Accepted Answer

Raising funds from a large number of depositors allows banks to lower their cost of borrowing by accessing a large pool of funds at lower interest rates. However, borrowing long and lending short and creating money by lending all their reserves are both strategies that involve higher risk and may not necessarily lead to lower borrowing costs for businesses.

Which of the Following Allow Banks to Minimize the Cost