Certified Residential Appraiser Practice Exam

The transfer of funds from low interest-bearing accounts to higher interest-bearing accounts is best described by the term disintermediation. This process occurs when individuals or institutions move their savings out of traditional financial intermediaries, such as banks, which offer lower interest rates. Instead, they seek to invest these funds in alternative options that provide a better return on investment, such as bonds, stocks, or higher-yielding savings accounts.

Disintermediation often reflects a response to the monetary policy environment, where lower interest rates encourage savers to look elsewhere for more lucrative investment opportunities. This movement can impact the banking system by reducing the funds available for banks to lend, thereby influencing interest rates and the overall liquidity in the financial system.

The other terms relate to different financial concepts:

- Intermediation refers to the process where financial institutions like banks act as intermediaries between depositors and borrowers, taking in deposits and providing loans.

- Reinvestment involves putting earnings or returns back into the investment at hand or into a different one, but does not specifically signify the transfer of funds between accounts based on interest rates.

- Disbursement is the process of paying out money or distributing funds from a source, which does not involve the concept of transferring funds between different interest