Aggressively issuing new loans is not a suitable strategy for addressing a liquidity deficit. In fact, it can exacerbate the problem. When a financial institution issues loans, it essentially provides funds to borrowers. This reduces the institution's available liquid assets. If the institution is already facing a liquidity deficit, issuing new loans can further deplete its liquid assets, making the deficit worse. Therefore, aggressively issuing new loans is not a viable strategy for addressing a liquidity deficit.

Choice A is incorrect. Aggressive advertising to attract NOW (Negotiable Order of Withdrawal) deposits can be a suitable strategy for addressing a liquidity deficit. NOW deposits are demand deposit accounts that allow the holder to write checks against the money deposited. This can increase the liquidity of XYZ by attracting more funds.

Choice B is incorrect. Selling some of their securities is also a viable strategy for addressing a liquidity deficit. By selling securities, XYZ can convert these assets into cash, thereby increasing its liquid resources.

Choice D is incorrect. Selling securities under agreements to repurchase (also known as repo transactions) can help address a liquidity deficit in the short term. In such transactions, XYZ sells securities and agrees to repurchase them at a later date at an agreed price. This provides immediate cash inflow and hence increases liquidity.

Things to Remember

• Liquidity deficit refers to a situation where a company does not have enough liquid assets to meet its short-term obligations.
• Aggressive advertising to attract NOW deposits can help increase the liquid assets of a financial institution.
• Selling securities can provide immediate cash inflow and help address liquidity deficits.
• Securities under agreements to repurchase (repo transactions) can be used to temporarily increase liquidity.