Commercial banks must carefully manage the trade-off between the security of their assets, their profitability, and their liquidity. To support this objective, banks maintain a portfolio containing various categories of assets.
Which one of the following correctly lists these assets in order from most liquid to least liquid?
Cash and reserves at the Central Bank →\rightarrow→ Treasury bills →\rightarrow→ Government securities →\rightarrow→ Advances to customers
Treasury bills →\rightarrow→ Cash and reserves at the Central Bank →\rightarrow→ Advances to customers →\rightarrow→ Government securities
Government securities →\rightarrow→ Advances to customers →\rightarrow→ Cash and reserves at the Central Bank →\rightarrow→ Treasury bills
Advances to customers →\rightarrow→ Government securities →\rightarrow→ Treasury bills →\rightarrow→ Cash and reserves at the Central Bank
176 exam-style questions on AQA A Level Economics 2.4 Financial markets and monetary policy (A-level only), covering 2.4.1 The structure of financial markets and financial assets, 2.4.2 Commercial banks and investment banks, 2.4.3 Central banks and monetary policy, and 2.4.4 The regulation of the financial system. Each one has a worked solution and a mark scheme showing where the marks go.