MYLAB ECONOMICS WITH PEARSON ETEXT -- A
MYLAB ECONOMICS WITH PEARSON ETEXT -- A
5th Edition
ISBN: 2819260099840
Author: Mishkin
Publisher: PEARSON
Question
Book Icon
Chapter 11, Problem 9Q
To determine

How do sweep accounts and money market mutual funds allow banks to avoid reserve requirements?

Concept Introduction:

Checking account deposits allow the account holder to carry out all financial transactions and write checks to the third parties. Checking account includes non-interest-bearing accounts (demand deposits), interest-bearing negotiable order of withdrawal accounts, and money market deposit accounts. Checkable deposit accounts are payable on demand, so account holders are ready to go with zero or less interest rate on these checkable deposit accounts. These fall in M1 category of money. However, the funds in this checking account need to be reserved with the Federal Reserve as per their set reserve requirement. The Federal Reserve does this to control liquidity in the banking system and to control the bank's money deposits. 

Blurred answer
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education