A financial innovation that enables banks to avoid the "tax" from reserve requirements by taking any balances above a certain amount in a corporation's checking account at the end of the business day and investing them in overnight securities that pay interest is called a ________.

Question

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A sweep account automatically "sweeps" the balance in a corporation's checking account at the end of the business day into overnight securities, which earns interest and helps the bank avoid the tax from reserve requirements. Money market mutual funds are not specific to banks and do not necessarily address reserve requirements. Deposit rate ceiling refers to an interest rate cap set by a government or regulatory authority. Disintermediation refers to the removal of financial intermediaries, which is not directly related to reserve requirements or sweep accounts.

A Financial Innovation That Enables Banks to Avoid the "Tax