How are demand deposits accepted as a means of payment?
Answer:
- Demand deposits offer another interesting facility. It helps in making the payment in cheque.
- A cheque is a paper instructing the bank to pay a specific amount from the person’s account to the other person or to the account holder.
- Thus, we see that demand deposits share the essential features of money.
- The facility of cheques against demand deposits makes settlement of payments possible without using cash.
- Since demand deposits are accepted widely as a means of payment, along with currency, they
constitute money in the modern economy.