1. When a bank relies on a policy of "purchased liquidity," it will generally be using more expensive funds.

True

False

2. When a bank deals with deposit "drainage" by buying more fed funds or entering the repurchase agreement market, we say the bank is using:

a. long-term funding sources

b. core deposits

c. purchased liquidity

d. liquidation of assets

3. When the spread between interest rates on RSA and RSL ____________, the bank's net interest income would be expected to ____________.

a. increases; increase

b. increases; decrease

c. decreses; increase

d. decreases; decrease