This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
Treasury bills are short-term debt instruments issued by the national government. They are considered very low-risk because they are backed by the government. T-bills are highly liquid, meaning they can be easily bought and sold before maturity. Their returns are generally lower than other investments but are considered safe. Fixed deposits are deposit accounts offered by commercial banks. They involve depositing a sum of money with the bank for a fixed period, during which it earns a predetermined interest rate. FDs carry a risk of default if the bank fails, though they are often insured up to a certain limit by deposit insurance schemes. Liquidity is lower than T-bills, as early withdrawal usually incurs penalties. Returns on FDs are typically higher than T-bills but vary depending on the bank and the deposit term. That's 2 down. 3 left today — send the next one.