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Money market mutual funds ____.
A) function as interest-earning chequing accounts
B) are legally deposits
C) are subject to reserve requirements
D) have an interest-rate ceiling
Answer: A
Diff: 1 Type: MC Page Ref: 248
Skill: Recall
Objective List: 11.2 Examine financial innovation and the growth of the "shadow banking
system"
In September 2008, the Reserve Primary Fund, a money market mutual fund, found itself in
the situation know as "breaking the buck." This means that ____.
A) they could no longer afford to redeem shares at the par value of $1
B) they required shareholders to contribute a dollar more in fees each month
C) shareholders were able to redeem shares for more than a $1
D) shares earned more than a dollar in interest
Answer: A
Diff: 3 Type: MC Page Ref: 249
Skill: Applied
Objective List: 11.2 Examine financial innovation and the growth of the "shadow banking
system"
In this type of arrangement, any balances above a certain amount in a corporation's chequing
account at the end of the business day are "removed" and invested in overnight securities that
pay the corporation interest. This innovation is referred to as a ____.
A) sweep account
B) share draft account
C) removed-repo account
D) stockman account
Answer: A
Diff: 2 Type: MC Page Ref: 249
Skill: Recall
Objective List: 11.2 Examine financial innovation and the growth of the "shadow banking
system"
Sweep accounts which were created to avoid reserve requirements became possible because
of a change in ____.
A) demand conditions
B) supply conditions
C) government rules
D) bank mergers
Answer: C
Diff: 1 Type: MC Page Ref: 249
Skill: Recall
Objective List: 11.2 Examine financial innovation and the growth of the "shadow banking
system"