In the context of banking, the 'Net Stable Funding Ratio' under Basel III is designed to:
A. Measure only short-term liquidity over 30 days
B. Set the repo rate
C. Ensure that banks maintain a stable funding profile over a one-year horizon
D. Determine capital adequacy only
Answer: Option C
Solution (By JKSSB Mock Tests)
The Net Stable Funding Ratio (NSFR) requires banks to maintain a stable funding profile in relation to their on- and off-balance-sheet activities over a one-year time horizon.
Explanation:
Menu costs are the small costs of changing prices. New Keynesian models show that even small menu costs can generate substantial nominal rigidity and real effects of monetary policy.
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