1.1.2 Banks in the Economy

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What is the term used to describe the process of creating a new asset (loan) from liabilities (deposits) with different characteristics?

Asset allocation

Deposit intermediation

Liability transformation

Asset transformation (correct)

Which type of financial intermediary channels deposits from depositors to borrowers?

Banks (correct)

Finance companies

Bond markets

Stock markets

What is the predominant source of financing for individuals and companies worldwide?

Finance companies

Bank loans (correct)

Stock markets

Bond markets

What feature distinguishes bank deposits from bank loans in terms of size and risk?

Bank loans are riskier and larger Signup and view all the answers

What do governments create to protect depositors against bank failures?

Safety nets Signup and view all the answers

What is the main activity of banks mentioned in the text?

Financial intermediation Signup and view all the answers

What is the primary source of revenue and profit for a bank?

Difference between interest received from borrowers and paid to depositors Signup and view all the answers

What do depositors assume about their deposits with a bank?

Their deposits are safe and will be returned in full on demand Signup and view all the answers

What does a bank do with the deposits it receives from depositors?

Uses them to finance loans to borrowers Signup and view all the answers

What is the primary concern for depositors as mentioned in the text?

The safety of their deposits held by the bank Signup and view all the answers

1.1.2 Banks in the Economy

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Questions and Answers

What is the term used to describe the process of creating a new asset (loan) from liabilities (deposits) with different characteristics?

Which type of financial intermediary channels deposits from depositors to borrowers?

What is the predominant source of financing for individuals and companies worldwide?

What feature distinguishes bank deposits from bank loans in terms of size and risk?

What do governments create to protect depositors against bank failures?

What is the main activity of banks mentioned in the text?

What is the primary source of revenue and profit for a bank?

What do depositors assume about their deposits with a bank?

What does a bank do with the deposits it receives from depositors?

What is the primary concern for depositors as mentioned in the text?

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