What are ‘demand deposits’?

cbse
economics
money-and-credit
cbse-class-10
cbse-class-10-social

#1

What are ‘demand deposits’?

Answer:

  • Workers who receive their salaries at the end of each month have extra cash at the beginning of the month.
  • This extra cash is deposited with the bank by opening a bank account in their name.
  • Banks accept the deposits and also pay an interest rate on the deposits.
  • In this way, people’s money is safe with the banks and it earns an interest as well.
  • People also have the provision to withdraw the money as and when they require.
  • Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.