Question

Why do demand deposits, along with currency, constitute money in the modem economy?

• A. Demand deposits are lightweight.
• B. Demand deposits are widely accepted as a means of payment.
• C. Demand deposits are relatively newer than coins.
• D. Demand deposits are unsafe for use.

Answer 1

The correct option is B Demand deposits are widely accepted as a means of payment.

Demand deposits are money that is readily available on demand. Demand deposits refer to the money deposited in the bank, which can be withdrawn by the customers at any point in time. When people have more money to spend, the demand for goods increases in an economy.