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What is demand deposits ? Why is it considered money |
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Answer» The deposits in the bank accounts can be withdrawn on demand, are known as demand deposits.... They offer another facility which lends it the essential characteristics of money as a medium of exchange, hence demand deposits are considered as money. The facility of cheques against demand deposits makes it possible to directly settle payments without use of cash. Demand deposits are accepted widely as a means of payment along with currency, so they also constitute money in modern economy. Demand deposits are considered as money for the following reasons :(i) They can be withdrawn from the bank whenever it is so required.\xa0(ii) They are widely accepted as a means of payment, along with the currency, hence they are considered as money.(iii) They are accepted widely as means of payment by way of a cheque instead of cash. Thus they are also considered as money in the modern economy.\xa0 |
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