Macroeconomics: Money and Banking · Class 12 · CBSE · Commerce Economics
Which statement correctly describes demand deposits with commercial banks?
Practice question from Macroeconomics: Money and Banking (Class 12 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
easy · MCQ · Q-4BABBD
Which statement correctly describes demand deposits with commercial banks?
- A.They cannot be withdrawn before a fixed maturity date.
- B.They can be withdrawn on demand and used for payments through cheques or electronic transfers.Correct answer
- C.They are issued only by the central government as legal tender.
- D.They are physical notes kept in the vaults of commercial banks.
Solution
Demand deposits are withdrawable whenever the depositor requires them. They also facilitate transactions through cheques and electronic payment instruments, so they form an important part of the money supply.
More from Macroeconomics: Money and Banking
- Which function of money is reflected when a person keeps money in a savings account to use it for purchasing goods in the future?
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- Which action by the central bank is most likely to reduce the money supply in the economy?
- Why is the central bank called the lender of last resort?
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