A Principal Disadvantage of Conventional Checking Accounts Compared to Money

question 141

Multiple Choice

A principal disadvantage of conventional checking accounts compared to money market mutual funds is that checking accounts

• A)are less liquid.
• B)often do not pay interest.
• C)cannot be used as a store of value.
• D)are not insured by deposit insurance.

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Definitions:

Market Failure

A situation in which the structure of incentives is such that markets will encourage individuals to undertake activities that are inconsistent with economic efficiency.

Economic Incentive

A financial or material benefit that motivates individuals or businesses to pursue certain actions or behaviors.

Rent Seeking Activities

Efforts by individuals or firms to gain access to economic rent through manipulation or exploitation of the economic system, not through productive activities.

Well-Organized Business

A business entity that is structured and managed efficiently, leading to enhanced productivity, profitability, and goal attainment.