Question:
Two statements I and II are given below. Read both the statements carefully and choose the correct option:
Statement I: ‘Demand deposits’ can be withdrawn on demand.
Statement II: ‘Demand deposits’ settle payments directly without the use of cash.
Two statements I and II are given below. Read both the statements carefully and choose the correct option:
Statement I: ‘Demand deposits’ can be withdrawn on demand.
Statement II: ‘Demand deposits’ settle payments directly without the use of cash.
Statement I: ‘Demand deposits’ can be withdrawn on demand.
Statement II: ‘Demand deposits’ settle payments directly without the use of cash.
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Test each statement separately against ordinary banking. Can the money be taken out whenever you want, and can a cheque settle a payment without cash changing hands.
Updated On: Sep 15, 2026
- Statement I is correct, but Statement II is incorrect.
- Statement I is incorrect, but Statement II is correct.
- Both Statement I and Statement II are correct.
- Both Statement I and Statement II are incorrect.
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The Correct Option is C
Solution and Explanation
Concept:
Step 1: Test Statement I.
People deposit their extra cash with banks by opening a bank account in their name. Banks accept the deposits and also pay an interest rate on them, and the depositors are free to withdraw the money as and when they require.
Since the deposits can be withdrawn on demand, they are called demand deposits, so Statement I is correct.
Step 2: Test Statement II.
A depositor who has a demand deposit can write a cheque instructing the bank to pay a specific amount to the person named on it. The payment is completed by transferring the amount from one account to another.
No cash changes hands, so Statement II is also correct.
Step 3: Connect the two statements.
Because demand deposits can be withdrawn at will and can settle payments directly, they are accepted widely as a means of payment. Along with currency they make up what is called money in the modern economy.
Step 4: Choose the option.
Both statements are correct, which is option (C).
Final Answer: (C) Both Statement I and Statement II are correct.
- Money kept in a bank account that the depositor can take out at any time is called a demand deposit.
- Such deposits share the essential features of money, which is why they are treated as money along with currency.
Step 1: Test Statement I.
People deposit their extra cash with banks by opening a bank account in their name. Banks accept the deposits and also pay an interest rate on them, and the depositors are free to withdraw the money as and when they require.
Since the deposits can be withdrawn on demand, they are called demand deposits, so Statement I is correct.
Step 2: Test Statement II.
A depositor who has a demand deposit can write a cheque instructing the bank to pay a specific amount to the person named on it. The payment is completed by transferring the amount from one account to another.
No cash changes hands, so Statement II is also correct.
Step 3: Connect the two statements.
Because demand deposits can be withdrawn at will and can settle payments directly, they are accepted widely as a means of payment. Along with currency they make up what is called money in the modern economy.
Step 4: Choose the option.
Both statements are correct, which is option (C).
Final Answer: (C) Both Statement I and Statement II are correct.
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