Economics · Banking and Monetary Policy
Why do commercial banks pay low or no interest on Demand Deposits?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Because demand deposits are highly non-liquid and involve complex processing.
- 2Because demand deposits offer high liquidity, allowing customers to withdraw funds at any time without notice.✓
- 3Because demand deposits are exclusively used for long-term investments and fixed savings.
- 4Because they represent the most secure and locked form of long-term capital for the bank.
Correct answer
Because demand deposits offer high liquidity, allowing customers to withdraw funds at any time without notice.
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