Page 66 - Understanding Economics for Class 10

Goyal Brothers Prakashan

(Courtesy: NCERT)
 Payments can be directly settled by issuing cheque against demand deposits without the
use of cash. Thus, we see that demand deposits share the essential features of money.
 Demand deposits constitute money in the modern economy as they are accepted widely
as a means of payment, along with currency.
 There would be no demand deposits and no payments by cheques against these deposits for banks.
 The modern banking system and the contemporary forms of money, such as currency and
deposits, are closely interlinked in their operations.

Let's work these out (Page No. 42)

1. M. Salim wants to withdraw `20,000 in cash for making payments. How would he write
a cheque to withdraw money?
Ans.

2. Tick the correct answer. After the transaction between Salim and Prem,
(i) Salim’s balance in his bank account increases, and Prem’s balance increases.
(ii) Salim’s balance in his bank account decreases and Prem’s balance increases.
(iii) Salim’s balance in his bank account increases and Prem’s balance decreases.
Ans. (ii) After the transaction between Salim and Prem, Salim’s balance in his bank account
decreases and Prem’s balance increases.

3. Why are demand deposits considered as money?
Ans. Demand deposits are considered as money because it shares the essential features of money,
which is, it acts as a medium of exchange. The facility of cheques against demand deposits
makes it possible to directly settle payments without the use of cash. Also, Demand deposits
are accepted widely as a means of payment, along with currency.

Economics Class X E-57