The most important source of liquidity for a depository institution is:
A)Federal funds loan.
B)new customer deposits.
C)sale of liquid securities.
D)money market loans.
E)sale of equity.

Question

Quizplus · Accepted Answer

The most important source of liquidity for a depository institution is new customer deposits because they represent the primary source of funding for a bank's operations. When banks receive deposits, they can either use them to make loans or invest in liquid securities to generate income. Therefore, new customer deposits are the lifeblood of a bank and the key driver of its ability to lend and generate profits.

The Most Important Source of Liquidity for a Depository Institution