) According to Keynesian/Post Keynesian (heterodox) economic theory which of the following statements about the financial systems under capitalist economies in incorrect ?

A ) The fundemental function of the financial system is liquidity creation.

B ) Financial institutions and markets do not intermediate either capital,or savings or exces income over expenditures either directly or indirectly.Financial system in Keyness theory deal with liqudity , and liqudity has nothing whatsoever to do with savings.

C ) The rationale for the existence of the financial system is channelling surplus funds of savers to deficit economic units who are in need of funds to finance their expenditures.

D ) One of the consequences of financial intermediation is the creation of new financial assets and new financial liabilities.

E ) By maturity transformation , (lending long,borrowing short) financial intermediaries create liqudity.

Which of the following statements regarding the banks motives for holding reserves is incorrect ?

A ) If banks on average expect an increase in policy rates they will be inclined to decrease their reserve holdings.

B ) As the opportunity cost of holding reserves increase ,ceteris paribus banks are expected to decreasetheir holdings.

C ) Depending on the volatility of fund inflows and outflows banks adjust the amount of their reserve holdings accordingly.

D ) Under instable financial conditions banks are inclined to hold higher amounts of reserves compared to normal levels.