Because MMDAs are in direct competition with MMMFs, the withdrawal rate is affected by the relative amount of explicit interest paid on these accounts.

Question

Quizplus · Accepted Answer

MMDAs and MMMFs are both considered as short-term investment vehicles, and they offer varying levels of interest rates. When the interest rate on MMDAs is high, investors tend to withdraw their funds from low-yielding MMMFs and deposit it in MMDAs. Therefore, the withdrawal rate is affected by the relative amount of explicit interest paid on MMDAs compared to MMMFs.

Because MMDAs Are in Direct Competition with MMMFs, the Withdrawal