26. What are demand deposits, and why should they be included in the stock of mo

Question

26. What are demand deposits, and why should they be included in the stock of money? 27. Who is responsible for setting monetary policy in Canada? If the Bank of Canada wants to increase the money supply with open-market operations, what does it do? 28. 29. Why dont banks hold 100 percent reserves? How is the amount of reserves banks hold related the amount of money the banking system creates? 31. What is the overnight rate? What happens to the money supply when the Bank of Canada raises the overnight rate?

Explanation / Answer

Answer 26 :-

Demand deposits are the deposits of money that can be withdrawn without any previous notice to the institution in which it was deposited. For eg money deposited in current account of any commercial bank.

Demand deposits should be considered in the stock of money because they can be used as a medium of exchange. One may draw a cheque to pay their expense.

The stock of money or money supply means the money available in the economy at a specific time and demand deposits are considered a part of it.

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