Demand deposits are classified as money because:

Question

Quizplus · Accepted Answer

Demand deposits are included in the definition of money because they can be easily and immediately used to make purchases and payments, just like physical currency. This makes them a highly liquid asset and an important part of the money supply. The fact that banks hold reserves (such as physical cash) to back up these deposits is also relevant, but it is not the defining characteristic that makes them money. The fact that demand deposits are the obligations of the government or that they earn interest income for depositors is not relevant to their classification as money.

Demand Deposits Are Classified as Money Because