What is money supply and its features?

What is money supply and its features?

It refers to demand deposits of the public with the commercial banks. Demand deposits are the deposits, which can be encased by issuing cheques at any time by the account holders. A demand deposit is treated as equal to currency held as it is readily accepted as a means of payment.

What is importance of money supply?

An increase in the supply of money typically lowers interest rates, which in turn, generates more investment and puts more money in the hands of consumers, thereby stimulating spending. Businesses respond by ordering more raw materials and increasing production.

What are the essential features of money?

The following are the features of money.

  • Medium of exchange. Money acts as a medium of exchange as it facilitates exchange through a common medium, i.e. currency.
  • Unit of value. Money measures and represents the values of goods.
  • Store of value.
  • Standard of deferred payments.

Why demand deposits share the essential features of money?

Demand deposits are the deposits which can be withdrawn on demand. Demand deposits eliminates the use of cash. Money can be easily deposited and withdrawn from the banks. Demand deposits are an essential feature of money.

What are the main features of demand deposits?

Demand deposits have the following characteristics:

  • Funds are payable on demand.
  • Funds can be interest bearing.
  • No eligibility requirements.
  • No limit on the number of withdrawals or transfers.
  • No maturity period.

How do Demand deposits are the 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.

What are the facilities provided by demand deposits?

The demand deposits in the bank can be used as a medium of exchange and it is accepted by all. For example, payments can be made by cheques instead of cash. This facility of cheques against demand deposits makes it possible to settle payments directly without using cash.

What is meant by demand deposit?

A demand deposit account (DDA) is a bank account from which deposited funds can be withdrawn at any time, without advance notice. DDA accounts can pay interest on the deposited funds but aren’t required to. Checking accounts and savings accounts are common types of DDAs.

Why demand deposits are called money in modern times?

Demand deposits are considered as money, because they can be withdrawn when required and the money withdrawn can be used for making payments. So, they are also considered as money in the modern economy.

What are the advantages of demand deposits?


  • Demand Deposits allows the depositor to withdraw funds on demand without any advance notice to the bank.
  • Demand Deposit allows joint owners of a single account.
  • The consumer can easily access their money from Demand Deposits.

How are deposits with the bank beneficial for the nation?

1 Answer. The deposits with banks are beneficial for individual as well as for nation: (i) Banks accept deposit and also pay an amount as interest and in this way people earn money. (vi) Banks provide loans for the promotion of International trade.

What is the main source of income for banks?


Where do banks make the most money?

Interest income is the primary way that most commercial banks make money. As mentioned earlier, it is completed by taking money from depositors who do not need their money now. In return for depositing their money, depositors are compensated with a certain interest rate and security for their funds.

What is the largest source of fees for banks?

ATM fees are one of the most common bank fees, and also one of the fastest-growing. According to a Bankrate survey of the largest banks in 25 major cities, the average fee banks charge non-customers for the use of their ATMs has risen from $0.89 in 1998 to $2.77 in 2014.

What are four benefits of a bank?

Benefits of a Bank Account

  • Bank accounts offer convenience. For example, if you have a checking account, you can easily pay by check or through online bill pay.
  • Bank accounts are safe. Your money will be protected from theft and fires.
  • It’s an easy way to save money.
  • Bank accounts are cheaper.
  • Bank accounts can help you access credit.

How are transaction fees calculated?

Calculate transaction cost. Subtract the cost of all assets purchased from the total price paid to the broker. The difference is the cost of the transaction, which can either be broker commissions or other fees.

What is a 3% processing fee?

Funds deposited into your Reseller account by credit card or PayPal are subject to a 3% processing fee. The 3% is calculated based on the final amount of payment, including the fee, not the initial amount.