Question

Which expression correctly states the Spread?

Options

• \[\text{Spread}=\text{Lending Interest Rate}+\text{Deposit Interest Rate}\]

• \[\text{Spread}=\text{Deposit Interest Rate}-\text{Lending Interest Rate}\]

• \[\text{Spread}=\text{Reserve Money}-\text{Monetary Base}\]

• \[\text{Spread}=\text{Lending Interest Rate}-\text{Deposit Interest Rate}\]

Answer 1

The correct expression is \[\text{Spread}=\text{Lending Interest Rate}-\text{Deposit Interest Rate}\]. This difference is the source of profit for commercial banks.