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c) A is correct but R is wrong.

d) A is wrong but R is correct.

8 What is a cheque? 2

9 Why are demand deposits considered as money? 2

10 Name the agency that issues currency notes in India. Why do we accept these currency notes as 3

a medium of exchange?

11 What are the modern forms of money currency in India? Why is it accepted as a medium of 3
exchange? How is it executed?

13 4
The other form in which people hold money is as deposits with banks. At a point of time, people
need only some currency for their day-to-day needs. For instance, workers who receive their
salaries at the end of each month have extra cash at the beginning of the month. What do
people do with this extra cash? They deposit it with the banks by opening a bank account in
their name. Banks accept the deposits and also pay an amount as interest on the deposits. In
this way people’s money is safe with the banks and it earns an amount as interest. People also
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bank accounts can be withdrawn on demand, these deposits are called demand deposits.
Demand deposits offer another interesting facility. It is this facility which lends it the essential
characteristics of money (that of a medium of exchange). You would have heard of payments
being made by cheques instead of cash. For payment through cheque, the payer who has an
account with the bank, makes out a cheque for a specific amount. A cheque is a paper
instructing the bank to pay a specific amount from the person’s account to the person in whose
name the cheque has been issued.

1.1 Why do people deposit money in banks? 1
1.2 What are demand deposits? 1
1.3 How do cheques facilitate transactions? 2

14 Why are demand deposits are important for the banks and for the economy of the country? 5
How do demand deposits facilitate transactions?