Which one of the following statements is true?
A) Demand deposits are assets of a bank.
B) A bank's assets plus its liabilities equals must equal zero.
C) A bank's reserves can only be kept as cash in its vault.
D) Assets generate income for a bank.

Question

Quizplus · Accepted Answer

Assets generate income for a bank through loans, investments, and other revenue-generating activities. Demand deposits are liabilities of a bank, not assets. The sum of a bank's assets and liabilities does not equal zero, as banks aim to have more assets than liabilities. While a portion of a bank's reserves may be held in cash in its vault, it can also be held in accounts with the central bank and other liquid assets.

Which One of the Following Statements Is True