Final answer:
The statement that money market accounts typically require high minimum balances is true. Money market accounts, which offer high liquidity and are protected by the FDIC, are classified as part of M2 and come with the trade-off of high minimum balance requirements.
Step-by-step explanation:
One disadvantage of a money market account is they typically require high minimum balances. This statement is true. Money market accounts are indeed a part of M2, which is a category of the money supply that includes not just cash and checking deposits (M1), but also near-money that can be quickly converted into cash such as money market accounts.
These types of accounts generally offer higher interest rates compared to regular savings accounts, but they do exact a trade-off in the form of high minimum balances, which could be a disadvantage for some investors. It's essential to remember that money market accounts offer several benefits, including safety and liquidity. The safety of bank accounts is exemplified by the protection offered by the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000.
While these accounts have high liquidity, the fact that they are not as liquid as checking accounts (which are M1) and typically have restrictions like limitations on the number of withdrawals contributes to them being classified as M2.