Question

How do demand deposits possess the essential features of money? (3 marks) or why are demand deposits considered a s money?

Answer 1

People 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 Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits. They exhibit essential features of money:

• The facility of demand deposits makes it possible to directly settle payments without the use of cash.
• Demand deposits are accepted widely as a means of payment, along with currency, they constitute money in the modern economy.