The introduction of money market substitutes for basic checking accounts was fueled partially by the:
A) relatively high rates of inflation that existed in the late 1970s and early 1980s.
B) reluctance of many retailers to accept checks.
C) high number of bank failures that were occurring in the 1970s.
D) higher interest rates banks had to pay on checking accounts.

Question

Quizplus · Accepted Answer

The relatively high rates of inflation that existed in the late 1970s and early 1980s fueled the introduction of money market substitutes for basic checking accounts. This was because inflation erodes the purchasing power of money, making it less attractive for people to hold onto cash or low-interest checking accounts. Banks responded by offering higher-interest money market accounts and other short-term investments as substitutes to retain customers.

The Introduction of Money Market Substitutes for Basic Checking Accounts