The higher the interest rate paid on term deposit and other nontransaction deposits,other things being equal,the less people would be expected to hold in demand deposits.

Question

Quizplus · Accepted Answer

When the interest rates on nontransaction deposits and term deposits increase, people tend to shift their funds from demand deposits, which usually do not earn any interest. Therefore, the higher the interest rate on term deposit, the less people would be expected to hold in demand deposits.

The Higher the Interest Rate Paid on Term Deposit and Other