In 1960, federal regulations prohibited banks from paying interest on checking accounts. Banks are now legally allowed

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In 1960, federal regulations prohibited banks from paying interest on checking accounts. Banks are now legally allowed to pay interest on checking accounts, yet the value of checking accounts has shrunk from more than 50% of commercial bank liabilities in 1960 to about 13% today. Because checking accounts now pay interest, shouldn’t they have become more popular with households rather than less popular? Briefly explain.

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Money, Banking, and the Financial System

ISBN: 978-0134524061

3rd edition

Authors: R. Glenn Hubbard, Anthony Patrick O'Brien

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